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Novated Lease deduction?

I'm new

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Replies 23

Hi there,

 

I currently have a novated lease through my employer where I pay a pre and post tax contribution.

 

Am I able to claim a portion of my work related travel expenses for my car based on the fact that I pay a post tax contribution?

 

I have also seen on this Community that you CAN claim km's against a novated lease (this was on an ATOverified post no less). Is this accurate, as it was my understanding you cannot.

 

Thanks Smiley Happy

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ATO Certified Response

Former Community Support

Replies 22

Hi @LoveDoingTax,

 

Thanks for your patience whilst we checked information with a specialist area regarding your query!

 

Generally, you can claim deductions for expenses for a car that you own or lease to the extent that you use it for work purposes.

 

However, when you ‘salary sacrifice’ a vehicle this is usually done through a ‘novated lease’ arrangement - where it's the employer who is leasing the vehicle from the finance company. In order for an employer to obtain the benefits of calculating the amount of fringe benefits tax payable by the employer on cars provided to employees under salary sacrifice arrangements, it's ordinarily the case that the employer either owns or leases the vehicle and makes it available for the employee’s private use. Because the employee doesn't own or lease the car in these situations they aren't entitled to claim any costs associated with the car. Section 51AF of the ITAA 1936 provides that no deduction is allowed for car expenses incurred by employees where the employer is providing the car to the employee to use.

 

Thanks, JodieH.

23 REPLIES 23

Most helpful response

ATO Certified Response

Former Community Support

Replies 22

Hi @LoveDoingTax,

 

Thanks for your patience whilst we checked information with a specialist area regarding your query!

 

Generally, you can claim deductions for expenses for a car that you own or lease to the extent that you use it for work purposes.

 

However, when you ‘salary sacrifice’ a vehicle this is usually done through a ‘novated lease’ arrangement - where it's the employer who is leasing the vehicle from the finance company. In order for an employer to obtain the benefits of calculating the amount of fringe benefits tax payable by the employer on cars provided to employees under salary sacrifice arrangements, it's ordinarily the case that the employer either owns or leases the vehicle and makes it available for the employee’s private use. Because the employee doesn't own or lease the car in these situations they aren't entitled to claim any costs associated with the car. Section 51AF of the ITAA 1936 provides that no deduction is allowed for car expenses incurred by employees where the employer is providing the car to the employee to use.

 

Thanks, JodieH.

Newbie

Replies 1

Not even fuel costs which are not part of the package?

I'm new

Replies 0

No, cannot claim running costs but may reduce the amount of FBT that would be required to salary sacrifice (see below).

 

Section 51AF applies because the vehicle, under the novated lease arrangement, was provided for exclusive and private use.

 

Notwithstanding the above, the employee may still benefit from the arrangement. The after-tax contributions towards the car’s running costs reduce the amount of FBT that she would have been required to salary sacrifice as a component of her total remuneration.

 

Note that section 51AF would also be relevant where a company or fleet car is provided by an employer to an employee (or their relative) for their exclusive and private use. In such instances, running costs incurred by the employee such as fuel would not be deductible.

I'm new

Replies 1

Hello if the car is under a novated lease in the employees name but the employer pays a portion of the costs, would it be then permissible to claim costs?

ATO Certified Response

Community Manager

Replies 0

Hi @MrGeeTee40,

 

Thanks for getting in touch!

 

Applying the same legislation listed above in @JodieH's comment you wouldn't be able to claim a deduction for the scenario you described.

 

Thanks, NateH

 

Newbie

Replies 0

Hi

 

Does make a difference if you novate a motor vehicle under a Public benevolent institutions and charities capping threshold. The employer is no incurring any running costs on the motor vehicle or any FBT. The employee does some work travel with the vehicle. 

 

Thanks

Newbie

Replies 16

Hi,

Further to tax deduction on novated lease car questions. I have two jobs and I have a novated lease with primary employer, I understand the novated lease is for the purpose of private use. I use the car to travel between the two emoloyers, am I eligible for tax deduction on the mileage incurred from travelling between the two employers?

ATO Certified Response

Community Moderator

Replies 15

Hi @JJWWYY

 

Welcome to our Community.

 

To be able to claim a work-related car expense, it must be an allowable expense that you incurred as an employee for a car you owned, leased or hired under a hire-purchase agreement.

 

For more information, refer to the previous posts as well as the car expenses and myTax 2019 Work-related car expenses pages on our website.

 

Hope this helps.

 

Thanks,

 

ChrisR

Newbie

Replies 0

Hi Chris, 

 

Does it make a difference if you are leasing the vehicle with all lease payments and running costs falling under the public benevolent fbt cap paid by the employee. You are paying less tax under the salary sacrifice.

 

regards