FAQ: What effect does Goods and Services Tax (GST) have on a Novated Lease?
What effect does Goods and Services Tax (GST) have on a Novated Lease?
In most cases, Goods and Services Tax (GST) applies to the purchase price of your salary packaged vehicle and to most related expenses.
When your vehicle is purchased, the finance company claims an Input Tax Credit (ITC) on the GST contained in the purchase price, up to the vehicle depreciation limit - presently $57,466.00 (for Financial Year 2011-12) for a maximum ITC of $5,224.18. As the financier is able to claim this ITC, your lease payments are calculated on the purchase price minus the amount of this credit.
In addition, most employers are also able to claim Input Tax Credits on the GST applied to the lease payments and other vehicle-related expenses. Additional savings resulting from these credits claimed by your employer may also apply to your Novated Lease arrangements.
Finally, at the end of the lease - or in the event of early termination - GST is charged on the residual value of the lease, which you are responsible for paying.
Please note that this information is of a general nature only. You should consult an accountant to obtain information specific to your situation.
Further Reading:
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What is the Employee Contribution Method (ECM) of calculating Fringe Benefits Tax (FBT), and how does it work?
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