I have a novated car lease where my employer has an arrangement with an external leasing company so that the lease rental (including finance and car running costs) related payments are directly deducted from my salary. My question is regarding the FBT resulting from the novated lease. The leasing company is forcing me to use the ECM method i.e. to fully offset the estimated FBT liability for Apr-25 to Mar-26 FBTY using a post-tax deduction whilst the remaining component of the monthly rental would become pre-tax deduction. However, this is having a direct impact on my income-tax as a part of my regular pay-cycles because of the lower pre-tax deduction. I have discussed deducting a different amount as post and pre-tax components with the leasing company but they are refusing. Can the leasing company force the employee to use the ECM method? Or, can the employee choose to use a different proportion of pre and post-tax components, depending on personal circumstances. As an employee, I am fine with my employer reporting the resulting FBT amount to ATO as a part of my income statement so that it is consumed for any income-tests and other government obligations.
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Hi @deepakcoin,
It's not mandatory under tax law, but some employers or salary packaging providers may require you to use the Employee Contribution Method (ECM) as part of their internal policy. Plus, some providers may only offer novated leases structured with ECM. You need to have a look at the agreement you currently have in place.
The salary sacrifice arrangement, is set up with your employer. Dependant on the terms of your contract of employment, you might be eligible to renegotiate the arrangement to best suit your needs.
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