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Federal Budget 2011 – Changes to Novated Leasing

As speculated, the Government announced changes to the “statutory formula” method for calculating Fringe Benefits Tax (FBT) on car fringe benefits. The changes will replace the current four-tiered statutory rate system with a flat statutory rate of 20 per cent that will apply regardless of the kilometres travelled.

What do these changes mean for existing Novated Lease contracts?

    In a nutshell, nothing.

Any Novated Lease contract entered into prior to 7.30pm (AEST) 10 May 2011 will be exempt from the change in FBT rates. So, it’s business as usual for all existing contracts.

What do the changes mean for new Novated Lease arrangements?
For drivers traveling up to 25,000 kms per annum, the new 20% FBT will apply. This is excellent news for those people that typically travel less than 15,000km per year as they will now gain the benefit of a lower FBT rate.
For drivers travelling 25,000km and over during the FBT year the new statutory rates will be modified each year within the term of the lease over the next four years.
So a customer driving more than 25,000km who entered a novated lease after 7.30pm (AEST) on 10 May 2011 will have a rate at the start of their lease, which will be revised each year until 1 April 2014 when a 20% standard rate is achieved.

For more information on how these changes affect new and existing Novated Lease arrangements, please contact our salary packaging professionals on 1300 664 323.