Are there any benefits to salary packaging a car?

Since the 2011 Federal Governments May Budget announcements, there are less tax incentives available to package a vehicle, but there might still be other benefits in salary sacrificing a vehicle via your employer compared to paying in after-tax wages.

One of the most common questions our clients ask us is, “how should I purchase a car”? The easiest alternative seems to be to use cash or re-draw from a home equity account and repay back as fast as possible, but there are no subsidiary benefits with that. The next most common outcome, if your employer allows it, is to salary package a vehicle.

Assuming interest rates are the same via a novated lease, a hire purchase, or using home equity to finance a car (which they are not) packaging a vehicle still has many other benefits.

The main benefits of salary packaging a vehicle could be:

  • GST free purchase price
  • Fleet discount on the purchase price
  • GST free running costs
  • Using pre-tax wages to cover costs

The negatives of salary packaging a vehicle are:

  • Limited to new or demo vehicles
  • Less than 1 tonne payload
  • Fringe Benefits Tax levied on the value of the vehicle benefit

Everyone’s circumstances are different but it’s worth the exercise to evaluate the merits and costs of salary packaging a vehicle via your employer. What limitations/benefits have you had with salary packaging?

General Advice Disclaimer

This article contains general advice only, which has been prepared without taking into account the objectives, financial situation or needs of any person. You should, therefore, consider the appropriateness of the information in light of your own objectives, financial situation or needs and read all relevant Product Disclosure Statements before acting on the information. Whilst every care has been taken to ensure the accuracy of the material, Paradigm Strategic Planning or Sentry Advice Pty Ltd will not bear responsibility or liability for any action taken by any person, persons or organisation on the purported basis of information contained herein. Without limiting the generality of the foregoing, no person, persons or organisation should invest monies or take action on reliance of the material contained herein but instead should satisfy themselves independently of the appropriateness of such action.

Paradigm Strategic Planning Pty Ltd is an Authorised Representative of Sentry Advice Pty Ltd AFSL 227748

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top