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Residual Value for a second 1 year lease

Newbie

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Replies 1

Hi,

 

If a new car has a novated lease for 1 year and then another novated lease is entered for another 1 year, then will the residual value at the end of the second lease be 65% of the residual value at the end of first lease or 56% of the original car value. That is, 

- Case 1: Residual value at the end of second one-year lease is 65% of the financed value for this lease (or the residual value at end of first one-year lease)

- Case 2: Residual value at the end of second one-year lease will be 56% of the original purchase value, that is the two separate one year leases will be counted as a single two year lease

Which of the above two cases will be applicable? Thanks

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

ATO Community Support

Replies 0

Hi @ishangoyal

 

Are asking this question because after 1 year on a lease you have changed employers and have taken out a new 1 year lease with your new employer. Is that correct?

 

Otherwise I don't understand why you would enter into a second 1 year lease with the same employer.

 

Ok, then the answer is that the residual value of the car will also be at least 65.63% of its agreed value when the lease started.

 

Relating this back to the original value of the car, it means that the minimum residual value at the end of the second year will be 43%.

 

You have to treat these two leases separately, not as a single two year lease.

 

Please note that the ATO has determined minimum residual value guidelines for leased assets. Your car may well have a higher market value than this depending on make and model.

 

I hope this is helpful.

 

RichATO

1 REPLY 1

Most helpful response

ATO Community Support

Replies 0

Hi @ishangoyal

 

Are asking this question because after 1 year on a lease you have changed employers and have taken out a new 1 year lease with your new employer. Is that correct?

 

Otherwise I don't understand why you would enter into a second 1 year lease with the same employer.

 

Ok, then the answer is that the residual value of the car will also be at least 65.63% of its agreed value when the lease started.

 

Relating this back to the original value of the car, it means that the minimum residual value at the end of the second year will be 43%.

 

You have to treat these two leases separately, not as a single two year lease.

 

Please note that the ATO has determined minimum residual value guidelines for leased assets. Your car may well have a higher market value than this depending on make and model.

 

I hope this is helpful.

 

RichATO