Company car or car allowance

[sstyln]

Got a company car at the moment – pretty crappy. Wouldn’t mind my own car for work. What’s better financially, company car or car allowance under a salary package?

Would be looking at a newish car around the $30,000 - $40,000 mark

[lowriding]

That is one of the how long is a piece of string questions. I will say this though , with the changes to the tax thresholds and savage depreciation on new cars , co cars & leases are no longer as attractive or the crowning glory as they once were, at least thats what i have found for me , much of the financial incentive has been eroded , again all depends on your lease and situation.
regards

[Glenn@Autowerks]

Had a company car for 15 years, then decided on car allowance. 1st VY SS Ute, then VY2 SS Wagon, now HSV....
Also depends on the amount of the allowance too, I think I am on the higher end of the scale there, wish the salary was too :confused:

My main aim was to get what I wanted, and I finally did it :D

Me happy now :lol:

[slash]

I've been on a car allowance for years & agree with HSV Z Clubbie.

I drive what I want. So far one XR8, two WRX's & three LS1 SS's.

Best to talk to a good accountant who deals in this area of expertise to ensure you get maximum benefit. Some say lease, others Commercial Hire Purchase.

[andrewdisco]

much of the financial incentive has been eroded , again all depends on your lease and situation.
regards


yeah, well said - with the maximum tax bracket now not kicking in until $95k there are far less savings to be had than there were 5 years ago. Also in the future eventually 30 cents will be the max tax bracket.

It's gotten to the point where you're better off going and buying a second hand car personally unless you are on a hefty wage.

[Jimbo_AUS]

My lease is via salary sacrifice and you have to admit that using before tax dollars to pay the lease HAS to be better than paying for a car loan from take home wages.

[andrewdisco]

yeah you're right - but here's a sample scenario -

Jo blogs does 20,000kms a year and makes $50,000.

Say the complete new car cost/expense is $13,000 per year.

As a company car he'd bit hit with 20% of this value as FBT... $2600 a year, but then you can subtract $900 for GST credits.

COMPLETE COST OF THE VEHICLE IS AROUND $15000 GROSS a year as a company car.

For you personally it would cost around $18000 GROSS a year.

So in your pocket you are about $2100 better off. (It's a great saving BUT not as good as it used to be).

BUT, not everyone NEEDS a new car... however under most salary sacrifice schemes you have to buy a brand new one.... A good 2 year old car (of the same model) with 40,000 kms on the clock bought from auction privately could cost you half the amount.

EFFECTIVE GROSS COST PER YEAR..... $9300 a year.

In your pocket it's a $3500 a year better than getting a new car through the company.

So a new company car is STILL better than a new private car. But if you just need a decent car and aren't fussed about getting one brand spankers.. sometimes it makes more financial sense to buy one out of your nett wage privately.

[crewiess]

From my understanding the value of the lease will be determined by the Fringe Benefits Tax - So if you use the formula method the logic says you need to do 25001 km per year. You can also reduce the costs if you make a contribution to the running costs out of after tax salary eg cleaning or some repairs. The quote for the crewman ss was $5000 per year more if I only did 15500 km per year using the formula method. It is also good to be paying rego, insurance and fuel out of pre tax $. Before the tax rate changes the benefit to me on the crewie was $5000 per year over buying and running it out of after tax $ and with the changes to the tax rates that dropped to aboy $4000 give or take. You can also use the log book actual use method so if you are doing 20000km year and 19000 km are work related it will cost a bucket load less.

Go and pay some money to get a number cruncher to work out some figures for you. They can also tell you about reimbursement or deductions for work km .

[crewiess]

[QUOTE=andrewdisco]

BUT, not everyone NEEDS a new car... however under most salary sacrifice schemes you have to buy a brand new one.... A good 2 year old car (of the same model) with 40,000 kms on the clock bought from auction privately could cost you half the amount.

EFFECTIVE GROSS COST PER YEAR..... $9300 a year.
[QUOTE]

A number of the companies will package a used car as long as it is not to old. Maximum age at end of lease was around 5yrs old.

[pah]

Hi all,

With my previous job (Telstra) the Co cars I've used were pool cars and only available when I could justify the need for one so I guess that doesn't count.

I now get a car allowance and that suits me fine because I can buy whatever make and model of car I prefer. Furthermore, I can spend money on a WIDE range of car expenses (nudge wink) and claim them against my car allowance.

The car remains my personal property so I don't have to loan it to Fed the thrasher who's written off two other Co cars and is known for bouncing car's off their rev limiters.

When the car is fully depreciated and needs to be sold, I don't have to hand it back to the company. It MINE. I keep it! For these reasons, I prefer a car allowance.



PAH

[Jimbo_AUS]

It is also good to be paying rego, insurance and fuel out of pre tax $.

This is how mine is setup. All expenses including fuel are paid through the lease in pre tax dollars. I don't lay out a cent in after tax dollars at all.

My car is costing me $275 a week in after tax money and thats heaps cheaper than getting a loan and paying my own expenses.

[clixanup]

As a company car he'd bit hit with 20% of this value as FBT... $2600 a year

There's more than one way to work out FBT, so the above comment is not necessarily true. "Business use" is defined differently in the FBT act than it is everywhere else, so if he only uses the car to travel to & from work there will be no FBT payable at all. But, you are right, FBT should still be considered. Seek the advice of your accountant if pain persists.

[sstyln]

I'm still undecided at the moment. Keeping the company car means that I don't have to spend money on fuel, insurance, repairs, services, rego etc.

Only thing is it's not the best of cars to be running around in.

And the question lies at how much the company is willing to give for an allowance, and what should I be looking at. If I do around 30-40,000 kms a year

Might just stick with it.

[Glenn@Autowerks]

Thats the real question at the end of the day, what does your company offer regarding car allowance ???

Once you know that you can make a decision :D

Our company has a standard of $15,000 and its up to us whether its taxed or not. We have one guy with a 1962 beetle on the allowance. What he doesn't spend on the car automatically gets taxed at 50% but he keeps the rest. I'd rather be driving a HSV and dipping into my pocket rather than driving an old dak dak.

[pah]

Our company has a standard of $15,000 and its up to us whether its taxed or not.

Same here. Somewhere around $15k sounds par for the course. It pays for all car costs and depreciation. If I don't spend enough throughout the year, I pay tax on the balance.

That means I am being paid for my fuel, insurance and tyres etc. I quite happy with that as these costs are a tad higher when you drive a V8.

If I spend a few thousand on essential engine repairs (Harrop blower etc), I'd imagine these costs would be a tax claim too?


PAH

[andrewdisco]

There's more than one way to work out FBT, so the above comment is not necessarily true. "Business use" is defined differently in the FBT act than it is everywhere else, so if he only uses the car to travel to & from work there will be no FBT payable at all. But, you are right, FBT should still be considered. Seek the advice of your accountant if pain persists.

Yeah, most people who run their own business or spend alot of time on the road for their job claim it via the log book method - I claim 90% as business use.. but most people that get offered salary sacrafice usually get lumped with the statatory method... and are also forced to buy a brand new car.

Then when you look at motorbikes it's different again.... I can spend $10,000 a year on my dirt bike pre-tax, use it 100% for personal use.. and only pay $250 in FBT :)

Main point is - alot of people get sucked into buying a new car on salary sacrifice because they think since it's "pre tax dollars" that it's going to save them a shitload... these days it's often better to just go and buy a good second hand car with your post tax dollars unless you have a genuine business use and can minimise your FBT or you intend to buy a new car regardless.

If you're on over 90k though, a company car is going to be a pretty logical choice... but for people on 30-50k the benefits aren't really there like they used to be.

[NewV8]

Hi all,

With my previous job (Telstra) the Co cars I've used were pool cars and only available when I could justify the need for one so I guess that doesn't count.


The car remains my personal property so I don't have to loan it to Fed the thrasher who's written off two other Co cars and is known for bouncing car's off their rev limiters.

When the car is fully depreciated and needs to be sold, I don't have to hand it back to the company. It MINE. I keep it! For these reasons, I prefer a car allowance.



PAH

I'm on a Telstra lease.
Everything paid for and it'a a Monaro :D
The weekly pirce is about $150 to $180 net.
I won't own it after the two years and the buy out price is unknown untill the last month of the lease.

If the CV8Z turns out to be a bit collectable, I might have to aim for
100000km to keep the price low :eek:

[caseyp]

Got a company car at the moment – pretty crappy. Wouldn’t mind my own car for work. What’s better financially, company car or car allowance under a salary package?

Would be looking at a newish car around the $30,000 - $40,000 mark
My SV8 was through a novated lease and whilst you get the car you want and it is paid for in pre tax $, there are some hitches. You have to specify the mileage you will do per year. If you go under and fall into the next FBT bracket, you will pay dearly. If you go over your mileage you will be charged up to 60 cent per KLM. If you exceed the allotted $ for tyres etc you are charged for it The biggest saving I got was on fuel as you get it at a discounted rate with Custom Fleet. I just looked at the figures and due to doing low KLM's the FBT on a Crewman SS will be $9,900 per year. That about what I would pay in extra tax. by taking the money up front. With the tax changing in June 06 to 41cents up to $125,000, novated leases are not that good unless you are on mega dollars. My SV8 has cost me in pre-tax $ over 3 years $57,000 and if I wanted to buy it at the end of lease they want approx $23,000. Makes it a dear car.
I ordered a VZSS crewman and will run a log book so I can claim any work mileage back on tax. I saved a bit as well as I am getting Fleet discount through the company.( due in Feb and comes with the LS2, but don't know with what KW rating)
You really need to get your accountant to do the figures.

[caseyp]

Got a company car at the moment – pretty crappy. Wouldn’t mind my own car for work. What’s better financially, company car or car allowance under a salary package?

Would be looking at a newish car around the $30,000 - $40,000 mark
My SV8 was through a novated lease and whilst you get the car you want and it is paid for in pre tax $, there are some hitches. You have to specify the mileage you will do per year. If you go under and fall into the next FBT bracket, you will pay dearly. If you go over your mileage you will be charged up to 60 cent per KLM. If you exceed the allotted $ for tyres etc you are charged for it The biggest saving I got was on fuel as you get it at a discounted rate with Custom Fleet. I just looked at the figures and due to doing low KLM's the FBT on a Crewman SS will be $9,900 per year. That about what I would pay in extra tax. by taking the money up front. With the tax changing in June 06 to 41cents up to $125,000, novated leases are not that good unless you are on mega dollars. My SV8 has cost me in pre-tax $ over 3 years $57,000 and if I wanted to buy it at the end of lease they want approx $23,000. Makes it a dear car.
I ordered a VZSS crewman and will run a log book so I can claim any work mileage back on tax. I saved a bit as well as I am getting Fleet discount through the company.( due in Feb and comes with the LS2, but don't know with what KW rating)
You really need to get your accountant to do the figures.

[Devil CV8]

I'm on a Telstra lease.
Everything paid for and it'a a Monaro :D
The weekly pirce is about $150 to $180 net.
When I saw the monaro on the table it was $18,000 gross...

missed out unfortunately so ended up ordering a sv6 at $15500. get in february..

[Jimbo_AUS]

My SV8 was through a novated lease and whilst you get the car you want and it is paid for in pre tax $, there are some hitches. You have to specify the mileage you will do per year. If you go under and fall into the next FBT bracket, you will pay dearly. If you go over your mileage you will be charged up to 60 cent per KLM. If you exceed the allotted $ for tyres etc you are charged for it The biggest saving I got was on fuel as you get it at a discounted rate with Custom Fleet. I just looked at the figures and due to doing low KLM's the FBT on a Crewman SS will be $9,900 per year. That about what I would pay in extra tax. by taking the money up front. With the tax changing in June 06 to 41cents up to $125,000, novated leases are not that good unless you are on mega dollars. My SV8 has cost me in pre-tax $ over 3 years $57,000 and if I wanted to buy it at the end of lease they want approx $23,000. Makes it a dear car.
I ordered a VZSS crewman and will run a log book so I can claim any work mileage back on tax. I saved a bit as well as I am getting Fleet discount through the company.( due in Feb and comes with the LS2, but don't know with what KW rating)
You really need to get your accountant to do the figures.

I don't get charged for doing more k's as far as I know.

Also when you add the fuel in it works like this.....you pay $1.20 at the bowser in pre tax dollars and that works out to less than 80 cents a liter in post tax money.