Classroom

Novated Lease Savings Case Study

To illustrate the savings that may be achievable when salary packaging a Novated Lease, we have prepared the following case study.

John’s company ABC Pty Ltd has entered into an agreement with packEDGE to provide employees the option of a Novated Lease under a Salary Packaging arrangement.

John wishes to buy a new Toyota Kluger Auto Wagon.

He would like to lease the vehicle for 3 years.
He estimates he will travel around 24,000 kilometres a year.
His annual gross salary is $75,000.

Assumptions when preparing this case study:

John is an Australian tax resident and has private health insurance
ABC Pty Ltd is entitled to a full input tax credit (ITC) for all payments under the Novated Lease and has agreed to credit these ITC’s back to the employee’s package

packEDGE savings example on the Purchase Price
of the Toyota Kluger Auto Wagon:

Recommended Retail Price (Inc. GST):	$52,235*
Plus On Road Cost (Initial Reg. & Stamp Duty):	$ 1,778
Less packEDGE negotiated fleet discount:		($6,500)*
Less GST claimed by Finance Company:		($4,158)
Total:	$54,013 less	($10,658) =
Amount Financed:		$43,355

packEDGE savings example on Servicing, Maintenance & Tyres:

Scheduled and un-scheduled Maintenance - Retail:	$2,300
Replacement Tyres (4) - Retail:	$2,100
Less packEDGE negotiated parts & labour discount 30%:		($1,320)
Total:	$4,400 less	($1,320) =
Net Amount:		$3,080

Total Vehicle Operating Costs Per Annum Include: $ 19,076.10

Lease Rentals
Servicing & Maintenance
Registration Renewal
Fuel Budget
Comprehensive Insurance
Less GST Credits (ITC’s) per annum:	($ 1,720.65) =
Total Amount Packaged:	$17,916.45

Annual Take Home Pay Estimate

	Salary Only	Vehicle Not Packaged	Packaged Pre Pre & Post Tax Deductions
Gross Taxable Income Per Annum	$75,000.00	$75,000.00	$75,000.00
Car Allowance plus	$0.00	$0.00	$0.00
Total Pre Tax Salary less	N/A	N/A	$ 9,601.00
Net Taxable Salary	$75,000.00	$75,000.00	$66,399.05

PAYG Tax less	$17,175.00	$17,175.00	$14,150.69
After Tax Salary	$57,825.00	$57,825.00	$51,248.31

Less Post Tax Deductions:
- Vehicle Operating Costs (incl. GST)	N/A	$19,076.10	N/A
- Employee Contribution (incl. GST)	N/A	N/A	$ 9,147.00

Estimated Take Home Pay Per Annum	$57,825.00	$38,748.90	$42,101,31
Estimated Take Home Pay Per Month	$ 4,818.75	$ 3,229.08	$ 3,508.44
Employee Advantage In Packaging A Vehicle P.A.			$ 3,352.41

Total Savings estimated over 3 years for John’s Novated Lease Package:

Savings on Purchase Price of Vehicle:	$10,658
Savings on Running Costs:	$ 1,320
Take Home Pay saving if using Pre & Post Tax method (ECM) including GST Credit @ $3,352.41 per annum:	$10,057
Total Package Saving:	$22,035
(Less GST on Residual Value of $19,510):	($ 1,951)
TOTAL Estimated Net Savings over 3 years:	$20,084
or per annum:	$ 6,695
or per month:	$ 558

It is very important to note that not every employee and not every vehicle will achieve these sort of savings. Each and every employee and the vehicle they choose all produce different outcomes.