Fincar January 21, 2023 No Comments

If you don’t have an accounting background, understanding all the ins and outs of fringe benefit taxes and how they apply in the case of a novated lease on your car could drive you up the wall.


A Recap on Novated Leases

A novated lease is considered a fringe benefit and is subject to fringe benefits tax, just like any other non-cash perk that comes as part of a job. Under a novated lease, the car you use is leased, technically speaking, by the company, although the costs are passed on to you and are taken out of your salary package before the pay cheque hits your bank account. Therefore, the use of a car leased primarily by the company for private purposes is considered a fringe benefit.

The good thing is your company’s accountant will take care of all the number crunching in terms of calculating fringe benefits tax. They will automatically take it out of your salary, much the same way the company normally handles taxes.


The Onus on You

Depending on whether your company prefers to use the Operating Cost Method or the Statutory Formula Method, you may or may not have to keep a log book.

The Statutory Formula Method doesn’t take any notice of whether you use the car for private or business use, but just uses a percentage multiplied by the cost of the car to work out what your fringe benefit is worth. Methods to calculate this have changed over the years, so make sure you look up the latest stipulations. A lot of employees like this method, as it’s a lot easier from their point of view.

If you have to use the Operating Cost Method, you have to keep a logbook of your driving so your company knows how many kilometres you drove for business, and how many you drove for private use. The drive to work in the morning and back home again in the evening both count as a private trip. Your fringe benefit is derived from the number of kilometres you drive for business and for personal use.

If you have a lot of driving to do as part of your job, you may want to reconsider whether a novated lease is the best option. Fortunately, you’re never short of finance options for a new car.


The Fincar team is here to help you with all your financing needs. Contact us today to help arrange your next car or equipment loan.