Recent changes made to the Fringe Benefits Tax (FBT) invites SMBs to take advantage of novated leasing, which could help retain staff, reduce administrative burdens and save time.
Novated leasing has been a traditional preferred structure for large businesses, however the recent FBT changes present a new opportunity for SMBs to embrace big business tax breaks for their own business and employees.
Director of nlc Danny Wilson believes the new 20 percent flat Statutory Rate of FBT for cars is beneficial to SMBs.
“With a novated lease, you can buy and run a car with pre-tax income dollars, save on the GST, and then conveniently bundle registration, insurance, petrol, repair and maintenance costs.”
FBT tracking and administration was previously seen as the most difficult component of novated leasing for SMBs to manage, and according to Wilson the new flat rate has eliminated that burden.
“(The) administrative burden of clocking kilometres has been removed allowing SME’s to more easily manage vehicle salary packaging arrangements for employees.”
Novated lease vehicles are not limited to business use, as it now benefits both employee and their associates, be it spouse or child.
“An employee doesn’t have to just use a novated car for work, it can also be used for personal purposes… with no need to track or drive excessive kilometres to enjoy the tax break.”
“Employers can also allow employees to package more than one vehicle, providing employees with a tax break on a spouses or a child’s car,” Wilson added.
Other benefits of the FBT include accessibility to those travelling shorter distances, simplifying administrative burdens and constituting novated leasing as a salary packaging technique to aid staff retention.
“It is a crucial time to hold onto good staff, and by extending novated car benefits to an employee’s spouse or children, SME’s can offer a real financial incentive which doesn’t hurt their cash flow,” says Wilson.