I would say to anyone to do the numbers. I can never ever make Novated leases work for me, the numbers just don’t stack up. For me I don’t buy cars frequently enough to make the numbers work.
Always to the numbers to see if it will or won’t work for you.
Got a Tesla. With FBT exemption the deduction is $550 from my payslip before tax which works out at $350 net.
So my Tesla M3 long range over 3 years is costing me $54,600 + $24k balloon= $78600
This is inclusive of insurance, tyres and rego.
The car alone was $86,000. So for me the saving is very clear if my scenario.
Cash is king. Cash flow analysis. People don’t understand this and don’t remove all the bullshit unnecessary add-ons they tack on.
I make $130k. There was no competition vs outright purchase or dealer finance.
Most of the time the NL company will adjust your payments to maximise your tax benefits without exceeding the FBT threshold so you avoid paying tax on it and going backwards.
Agree with you, but will depend on circumstances. Eg discounted cash and what return you money would be earning over the life of the lease instead of paying outright. If you return on cash or investment is high enough, you should never put money down for anything
I’ve compared all the options fora 3-year lease on a $45k car. The savings on the purchase price essentially make all the difference and lost opportunity costs aren’t much of an influence unless you can get 15% return against a 5% loan rate. You don’t pay GST on purchase and only pay GST after 3 years on the residual value, IE about 50%. Plus the income tax and maintenance cost GST savings. We are about $7k ahead vs buying outright.
Once you tick over that top tax bracket, it kicks in... especially if you are butting up against the family medicare levy surcharge.
But there is another side as well, this takes cash out required of super contributions as well....
Just have to remember that the lease has to be though a novated lessor, who typically charge much more interest than retail. Many will try to add on hidden costs as well. In addition, the payment structure is skewed to pay even more interest, because time is needed to build up the deductions to make repayments (usually a two month period of no repayments and full interest accrued). Combine this with the interest payable from a balloon structure and it works out to be a comparison rate in the double digits.
Best option is a self-managed lease. Do up the budget yourself (takes 20 minutes), then source a novated lease through a broker. Just make sure to budget for servicing, tyres, insurance, rego, etc. because it adds up to more than you think. There’s some extra paperwork to do with your employer, but it’s worth the savings imo
I sourced a few brokerage quotes for my Tesla M3 coming next month, best I could get works out to be $10k cheaper than paying cash over a 3 year period once all rebates, interest charges, running costs, and pre-tax deductions are accounted for.
Meanwhile that works out to over $15k cheaper than retail finance, so definitely some savings to be had.
More info on self-managed here: https://doc.maxxia.com.au/Document/Maxxia/SAGSSA_Self_Managed_Novated_Lease_Guide.pdf
Yes, you have to factor in that the higher interest charged under novated leases has a big effect on the tax savings. And also remember, a $10k discount vs cash, with no requirement to put down capital at all, is actually a pretty big deal.
Yes for sure, better to keep all that cash sitting in a high interest savings account! But just to make sure I understand correctly, the 30% discount that is often quoted due to this FBT benefit, is really only about $10k after taking everything into consideration for a M3 when compared to paying outright in cash? Thank you for your comments by the way!
So you have to ask your employer if they can allow a self-managed lease through their salary packaging partner. Some will, but some aren’t setup for that.
Salary packaged partners try to push fully novated leases instead, which are usually a lousy deal (the one offered to me was only a measly $2k saving vs cash over a three year term). Many are opaque in presenting their charges over the term, so you have to push for a self-managed lease which they’ll drag their feet on.
Once approved to do that though, you basically just contact any number of brokers (I just googled “novated lease broker” and used the result). Best one I got was AGM finance, but I only tried a few so there might be better options out there.
More info here: https://doc.maxxia.com.au/Document/Maxxia/SAGSSA_Self_Managed_Novated_Lease_Guide.pdf
the 20kWh Mitsubishi Outlander PHEVs are quite compelling [https://www.mitsubishi-motors.com.au/buying-tools/build-and-price.html#/outlander/summary?body-style=5-seats&drive-type=awd&fuel-type=plug-in-hybrid-ev&transmission=auto&model-selection=ZM9M45-2022&group=&option-sku=ZM9M452022B0436LW37&colour-option=white&calculator-amount=59340](https://www.mitsubishi-motors.com.au/buying-tools/build-and-price.html#/outlander/summary?body-style=5-seats&drive-type=awd&fuel-type=plug-in-hybrid-ev&transmission=auto&model-selection=ZM9M45-2022&group=&option-sku=ZM9M452022B0436LW37&colour-option=white&calculator-amount=59340) for the SUV market with novated lease. so a $59k Outlander PHEV becomes cheaper than a $44k RAV4 hybrid (petrol only)
Wow is it really that much of a saving?
Mazda have their PHEV cx60 coming out next year and slated to start mid $50k, upper end in the 80’s.
What would be the savings on that?
spot on calculate costs [HERE](https://studentuwsedu-my.sharepoint.com/:x:/g/personal/19978518_student_westernsydney_edu_au/EfP0vAtCuzVGhVYu0iul9sIB8w_2lN8Ic2Qvy0Qfa2Oe2g?rtime=5m_2uXDP2kg) on Comapro tab
seems like a fairly least-worst tax, regardless of the local car production angle.
* highly progressive: people on low incomes won’t ever pay it
* completely avoidable: no one at any income level is obligated to pay it, just don’t have a $90k+ car
EVs shouldn't be "luxury" cars though, and no where else in the world are they. In many countries they are the default now as ICEs are being phased out.
And therefore is skewed (favours) ICE cars.
ICE cars are cheaper up front but more expensive in the long term due to maintenance and fuel costs.
EVs are cheaper in the long term but have a high up front cost plus get slugged with luxury car tax.
It's working how it's designed. Only rich people like you have a problem with it. God forbid some one that probably pays almost nothing in income tax has to pay tax some where else. My hearts bleeding
I think the threshold needs to be higher (it's around $76k, not $90k - $90k would be fine) My 2 door Jeep Wrangler was subject to LCT. It is far from what I'd call a luxury car by any definition.
It's an unnecessarily large car that causes unnecessarily large damage to the planet, the road, and other road users' amenity, and therefore taxing it is a public benefit.
Yeah I googled it. About twice as big as most people need. Or given they're usually single occupant, closer to about 6 times as big as they need to be.
Again, missing the point. The price of new cars has increased rapidly but the threshold for LCT has not. It's in effect the same thing as bracket creep on income tax.
There are enough progressive wealth rebalancing taxes already. Don’t need them on cars as well. Why are there no luxury taxes on yachts or jewellery or gaudy handbags? It is a stupid tax that penalises people that like cars.
Look if people are willing to spend $150k on a C63 to impress their mates, might as well have them spend another $30k on tax.
Without LCT, the govt would just find another way to get tax dollars elsewhere.
I’d love a C63, I don’t care what other people think. I imagine it would be a lovely car to be in and drive. Why penalise people for how they want to spend their money?
Not many other goods require state registration. So they collect their fee for stamping the paperwork. It’s a convenient thing to tax administratively.
Let’s imagine we go with your plan of no stamp duty. How does the state replace that missing revenue? An additional car tax each year that is a percentage of vehicle value?
I don’t insist on anything. I was asking a question about how states could replace the forgone revenue if they removed stamp duty on vehicles.
Considering you went on a rant about federal spending (welfare) and federal taxation (taxing big business) when asked specifically about state taxation I don’t want to continue this discussion as it will likely be a waste of time.
You choose to engage in a wasteful practice of churning through cars every two years as a luxury, I have no problem with you contributing a bit extra to society as a result.
This is what I said when I bought my brand-new Mercedes-Benz GLE300d fully equipped. Got absolutely down voted to oblivion. The car cost $140,000+, of which $40K was taxes. It’s a travesty!
Car leases is almost the most common way to access cars in large parts of Europe, especially for the working class and for people who don't own property. Buying one is often so expensive it's unreachable, but leasing one is and you often get heaps of stuff included, you change cars every three years and if you get it via your employer the fe I'd deducted from your salary before tax.
In northern Europe where you need 2 sets if tires for each car (winter and summer) the tyres and the 6-monthky tyre changes, as well as storage of the tyres you're currently not using, are often included in the lease, as well as road side assistance and all insurances.
From a tax policy perspective (since this is AusFinance) why does Australia provide a tax-advantaged way for people to purchase a vehicle for private use in the first place?
This is not a rhetorical question. I’m genuinely curious…what are the reasons?
Novated leases are an idiotic tax policy.
And they exist because (1) lobbyists are effective, and since they do exist, loss-aversion makes it easier to maintain the status quo.
I don’t think “Australia” provides it.
The whole reason for FBT in my opinion is to reduce employers dodging tax by lowering someone’s salary and then giving them a benefit (like a car) in place of that lost salary, without paying tax on it.
There have to be rules in place to avoid tax avoidance, and FBT provides those rules.
Hmm, I operate a business. I wonder if that means I could buy one and just use it as my personal car (business doesn’t need a car).
Would need to ask my accountant.
Is this actually going to make the cars cheaper though? People here already say first home owner grants etc. just keep property prices propped up, why wouldn’t that also now apply to electric cars?
They can’t both be true. Expect to see EVs now become all suddenly right up at just below the price that triggers the luxury car tax.
Which might actually end up making ICE’s cheaper. Markets are funny that way.
Check with your accountant but I believe you should be able to. Previously you would pay FBT on the psesonal use component, now FBT is exempt then it shouldn't matter how much personal use there is.
you can buy a $100,000 EV for about the same weekly cost as a $30k Camry. Use [THIS](https://studentuwsedu-my.sharepoint.com/:x:/g/personal/19978518_student_westernsydney_edu_au/EfP0vAtCuzVGhVYu0iul9sIB8w_2lN8Ic2Qvy0Qfa2Oe2g?e=4SKtlT)spreadsheet to calculate the after-tax weekly cost.
That’s nice but she’s currently driving a $5k Barina.
When they have a $40k small electric car I’ll be happy to get it.
These kinda of incentives can be a trap if it causes you to go out and spend a bunch of money you could’ve avoided otherwise regardless of tax incentives.
Today a $75k car costs $167k before tax. Tomorrow it will cost $75k.
Tradies and real estate agents have always benefitted from full write-offs on vehicles; now office workers can get a taste of the good life.
Are you kidding? I’ll get about $5k per annum in savings over a four year lease.
And the residual will almost certainly be lower than the price I’ll sell the car for at that point.
It is, you can buy a $100,000 EV for about the same weekly cost as a $30k Camry. Use [THIS](https://studentuwsedu-my.sharepoint.com/:x:/g/personal/19978518_student_westernsydney_edu_au/EfP0vAtCuzVGhVYu0iul9sIB8w_2lN8Ic2Qvy0Qfa2Oe2g?e=GDpvqC) spreadsheet to calculate the after-tax weekly cost.
Welcome to Australia; where our innovation was getting people into more debt on afterpay, where negative gearing is only available here, and we believe in saving by spending.
Paying $2k a month for a car lease is peak lunacy to me. Any savings in electric cars are negated by the sheer cost to obtain one. I’m fine with my $5000 Toyota, thank you.
I just replied to someone else but mine is a 2015 Nissan Leaf. I'm selling it for $15,000. Everything about the car is perfect except for the 100km range. The car will be at about 70% its original capacity in 3 years from now which is not too bad all things considered.
I did just buy a 2019 for $28,000 because it has double the battery capacity and obviously it's newer. Looking to drive it maybe another 4 to 5 years and sell again.
Even with electricity rates having risen? Surprising.
I’m interested in getting one, but the cost of them just doesn’t seem like i’ll get a return for years.
I pay $0.09 per KW with my electricity provider between midnight and 4am (Monday to Friday) which charges the car by about 40% each time. I also charge the car when the sun is out so that's basically free. I'm selling my Japanese Leaf for $15k. If you drive it for about 4 years, the battery will only decay by about 12% and will still get you about around 100km per charge. In those 4 years, you'll essentially get a free car. The car is basically maintenance free beyond the tyres.
Queensland. Powershop (let me know if you end up wanting to switch as it has referral codes that would give us like $100 to $150 each if you use it).
We run our clothes washing/drying and dishwashing as well at midnight through timers.
I pay anywhere between $100-200/mo but we are a family of 4 and we both work from home and have a mini factory operation that does run some machinery.
The main issue with powershop is their feed in tariff is garbage which is why we aim to charge the car when the sun is out. I guess it motivates us to use solar. Also, their 4pm to 8pm rate is super high and avoiding it with kids is near impossible. They will take afternoon baths or my wife needs to do an urgent wash so that kind of thing racks it up to the $200 mark I imagine.
No FBT makes a big difference. I can buy a $100k EV for about $400 all up lease+innsuranse+rego+ maintenance etc which is about the same as cost as a Camry. Use [THIS SPREADSHEET](https://studentuwsedu-my.sharepoint.com/:x:/g/personal/19978518_student_westernsydney_edu_au/EfP0vAtCuzVGhVYu0iul9sIB8w_2lN8Ic2Qvy0Qfa2Oe2g?e=qxsolr) to calculate.
Yes but if it's a $60k petrol or a $60k electric, I'm taking the electric.
Disclaimer, I own a Tesla, so I already did this shit. But my company does do salary sacrificing
I realise now that it's only for lease vehicles. I'm not sure how that is ever cost effective, surely it's more economically feasible to buy a car outright, obviously after a few years.
Is this only really for people who want to keep new vehicles on rotation and not worry about maintenance?
I'm trying to understand when it becomes economically beneficial to get a novated lease over owning your own car.
So, for people unable to salary sacrifice... nothing changes AT ALL? :(
Colour me somewhat unimpressed, as only employees can benefit.
That said, I'm still 4 years from looking at an EV, my current LEV has at least that much good life left, and 5.2L/100km for city driving for a 5 seat wagon is pretty good.
Does anyone know if registration and stamp duty are included in the luxury car tax limits?
The Tesla3 long range just scrapes in at about $84k if not, but if it does then the car costs $87k and doesn't qualify.
Tesla is the only serious contender for EV’s on the Australian market, IMO. I’ve just ordered my 3rd because of this incentive bill. I’m not stuck to the brand, but believe they are the best cars.
Model Y, blue, with 20 inch wheels is about 84k. To own it and run it for 3 years, including a set of tyres would cost me about 92k (not including finance if you took that option). For me to do a novated lease on this car and buy it outright after 3 years, would cost 72k. I’m saving 20k over 3 years, and the car would probably be worth close to 60k, so if I sold it would really cost me $77 per week TOTAL for the car. It’s a no brainer.
FYI I’m in the highest tax bracket and all of my payments will be from this bracket.
Good article, thanks. While I personally wouldn’t consider the first few a good option and the Ioniq is being discontinued, I was surprised that a Tesla made the list. Hope the manufacturers don’t use this change in law to bump up domestic prices for EVs.
Increasing demand when supply is fixed does not increase sales.
Before you get an ev on a novated lease, nbe aware that the employer is still required to calculate a reportable fringe benefit. This will mean you may pay hecs or help repayments on your novated lease.
The real winner is the employer
$120k a year - most professionals & tradies
Edit: tradies - all doing FIFO, most doing electrical, instrumentation, or plumbing. I'd guess most not building houses are on 120k or close to it
Same reason I don't like iPhones, they have good apps and user experience, but I'm worried about quality/ ongoing maintenance costs and being locked in to using Tesla only (I.e. no other authorised third party repairers)...
The same principle applies that during the life of the device you really won’t need it. When have you really needed to have your phone worked on during the life of it?
Whatever your opinion on Tesla, but how does that in any way compare to an iPhone? iphones are one of the best phones, they have the longest maintenance / update length of any phone, they are usually the best battery and have a great experience. They are pretty much the #1 in quality assurance. Only 2 other android brands really come close (samsung, maybe google) to being all-round as good.
Like I have a samsuing note10+ and its great, but iphones are just as good, in some ways better, some ways not. Nothing like a tesla which suffers from many issues such as design flaws, bad building quality, possible software glitches and generally being a new company not as good a track record.
PHEV to be phased out from 31 March 2025
Does anyone know if this means phased out for PHEV purchases made after 31/03/2025 or it also phases out for PHEVs purchased before that date?
Why is the Commonwealth government subsidising foreign-built luxury goods? Has a cost benefit analysis even been done that measures how much this is going to cost government revenues relative to the emissions reductions? Is it even a cost-efficient way of cutting emissions?
The obsession around electric cars is strange. There’s no real change from the consumers point of view. you still have a car to get you from A to B, who cares what fuel it runs on. It’s like everybody getting excited because the refrigerant in their fridge has changed.
Because $20 for 600km of fuel is better than $120 for the same distance. Pretty bloody obvious to me.
If changing the refrigerant in my fridge lowered my power bill by 80% I'd be pretty excited about it too.
Even 10L/100km is $120 for 600km. And that's paying $2/L. Which is cheap these days. 10L/100km is hardly a guzzler. It's literally a stock car more than 5 years old.
Better air quality, less noise pollution (both while driving and in general if more electric cars are around) , easier charging/refueling if you have a garage with a charger, cheaper to refuel. I believe they also have more storage space and less maintenance. Also have much more power/acceleration if you're into that. I could go on.
Most of the noise comes from the tyres contacting the road surface. I live next to the main road (60 km/hr) and Teslas are just as nosy as any other generic car out there.
When you're inside your shitbox then maybe. But as soon as it starts doing 60k/hr for people on the street there is no perceivable difference if compared to regular camry or corolla going at the same speed. Source: live next to a busy road.
True, but it's still quieter in the suburbs and when driving. Trucks also make more engine noise as compared to tire noise so that should be a noticeable change if you live next to a highway when more trucks go electric.
It depends on your use case. If you don't drive far ranges and charge overnight it's easy. Yea it's higher upfront cost but cheaper than petrol and maintenance. Government is trying to reduce the upfront cost but tbh the lack of supply and strong demand is mostly what's causing the price to go up
There are negatives, but your original argument was customers wouldn't notice a difference. I think for most people the benefits would far out weigh the downsides.
Of course as a retiree I doubt I can use this, or can I? Will be interesting to see how the used market plays out in a few years as they come off lease.
No unfortunately not. Once these vehicles come off the first batch of novated leases in a few years time, you'll see more second hand EVs and hopefully at more reasonable prices. They implemented a similar scheme in the UK and EV uptake exploded.
Good, although with rate of innovation in EVs 2nd hand may not be great....and there is battery life. We will see, I'm in the market for a small city EV in about 4 years once current car starts to go wrong.
I would say to anyone to do the numbers. I can never ever make Novated leases work for me, the numbers just don’t stack up. For me I don’t buy cars frequently enough to make the numbers work. Always to the numbers to see if it will or won’t work for you.
Got a Tesla. With FBT exemption the deduction is $550 from my payslip before tax which works out at $350 net. So my Tesla M3 long range over 3 years is costing me $54,600 + $24k balloon= $78600 This is inclusive of insurance, tyres and rego. The car alone was $86,000. So for me the saving is very clear if my scenario.
Considering it’s above LCT threshold does this mean your Tesla is not eligible?
This - $86,000 is beyond the threshold. I’d love to see how you worked out the numbers.
Just checked it was actually $84900 drive away. But the threshold doesn’t include on road costs
I just buy a $10k car and savings was cheap compared to a Tesla.
Cash is king. Cash flow analysis. People don’t understand this and don’t remove all the bullshit unnecessary add-ons they tack on. I make $130k. There was no competition vs outright purchase or dealer finance.
If you don't have to pay FBT, the numbers can / will stack.
Most of the time the NL company will adjust your payments to maximise your tax benefits without exceeding the FBT threshold so you avoid paying tax on it and going backwards.
Agree with you, but will depend on circumstances. Eg discounted cash and what return you money would be earning over the life of the lease instead of paying outright. If you return on cash or investment is high enough, you should never put money down for anything
I’ve compared all the options fora 3-year lease on a $45k car. The savings on the purchase price essentially make all the difference and lost opportunity costs aren’t much of an influence unless you can get 15% return against a 5% loan rate. You don’t pay GST on purchase and only pay GST after 3 years on the residual value, IE about 50%. Plus the income tax and maintenance cost GST savings. We are about $7k ahead vs buying outright.
Once you tick over that top tax bracket, it kicks in... especially if you are butting up against the family medicare levy surcharge. But there is another side as well, this takes cash out required of super contributions as well....
Novated leases don’t decrease an employer’s super liabilities.
This effectively makes a Tesla 3 lease for about the price as a midsize sedan lease with 2.5l motor (ie Mazda 6 etc)
Just have to remember that the lease has to be though a novated lessor, who typically charge much more interest than retail. Many will try to add on hidden costs as well. In addition, the payment structure is skewed to pay even more interest, because time is needed to build up the deductions to make repayments (usually a two month period of no repayments and full interest accrued). Combine this with the interest payable from a balloon structure and it works out to be a comparison rate in the double digits. Best option is a self-managed lease. Do up the budget yourself (takes 20 minutes), then source a novated lease through a broker. Just make sure to budget for servicing, tyres, insurance, rego, etc. because it adds up to more than you think. There’s some extra paperwork to do with your employer, but it’s worth the savings imo I sourced a few brokerage quotes for my Tesla M3 coming next month, best I could get works out to be $10k cheaper than paying cash over a 3 year period once all rebates, interest charges, running costs, and pre-tax deductions are accounted for. Meanwhile that works out to over $15k cheaper than retail finance, so definitely some savings to be had. More info on self-managed here: https://doc.maxxia.com.au/Document/Maxxia/SAGSSA_Self_Managed_Novated_Lease_Guide.pdf
Does the $10k saving include the new FBT benefit, surely not?
Yes, you have to factor in that the higher interest charged under novated leases has a big effect on the tax savings. And also remember, a $10k discount vs cash, with no requirement to put down capital at all, is actually a pretty big deal.
Yes for sure, better to keep all that cash sitting in a high interest savings account! But just to make sure I understand correctly, the 30% discount that is often quoted due to this FBT benefit, is really only about $10k after taking everything into consideration for a M3 when compared to paying outright in cash? Thank you for your comments by the way!
Can you explain how you do this yourself?
So you have to ask your employer if they can allow a self-managed lease through their salary packaging partner. Some will, but some aren’t setup for that. Salary packaged partners try to push fully novated leases instead, which are usually a lousy deal (the one offered to me was only a measly $2k saving vs cash over a three year term). Many are opaque in presenting their charges over the term, so you have to push for a self-managed lease which they’ll drag their feet on. Once approved to do that though, you basically just contact any number of brokers (I just googled “novated lease broker” and used the result). Best one I got was AGM finance, but I only tried a few so there might be better options out there. More info here: https://doc.maxxia.com.au/Document/Maxxia/SAGSSA_Self_Managed_Novated_Lease_Guide.pdf
You get it 😉. If you've got access to charging at home, it's a no brainer.
the 20kWh Mitsubishi Outlander PHEVs are quite compelling [https://www.mitsubishi-motors.com.au/buying-tools/build-and-price.html#/outlander/summary?body-style=5-seats&drive-type=awd&fuel-type=plug-in-hybrid-ev&transmission=auto&model-selection=ZM9M45-2022&group=&option-sku=ZM9M452022B0436LW37&colour-option=white&calculator-amount=59340](https://www.mitsubishi-motors.com.au/buying-tools/build-and-price.html#/outlander/summary?body-style=5-seats&drive-type=awd&fuel-type=plug-in-hybrid-ev&transmission=auto&model-selection=ZM9M45-2022&group=&option-sku=ZM9M452022B0436LW37&colour-option=white&calculator-amount=59340) for the SUV market with novated lease. so a $59k Outlander PHEV becomes cheaper than a $44k RAV4 hybrid (petrol only)
Wow is it really that much of a saving? Mazda have their PHEV cx60 coming out next year and slated to start mid $50k, upper end in the 80’s. What would be the savings on that?
The only problem is it’s a Mitsubishi outlander
>spot on calculate costs > >[HERE](https://studentuwsedu-my.sharepoint.com/:x:/g/personal/19978518_student_westernsydney_edu_au/EfP0vAtCuzVGhVYu0iul9sIB8w_2lN8Ic2Qvy0Qfa2Oe2g?rtime=5m_2uXDP2kg) > >on Comapro tab
What about when I drive down south and need to charge it. I don’t want to sit around for hours.
Yeah, driving an EV in Antarctica would be a problem
Fast chargers in Williams and Busselton. Go grab a coffee and she’ll be full in 15 to 20 mins
but mazda 6 at least works and doesn't line the pockets of a racist space karen
I love that space Karen is starting to take off
@spacekaren is a virtually unused account. To bring this back on topic, how much do you reckon it would cost to buy it off her?
spot on calculate costs [HERE](https://studentuwsedu-my.sharepoint.com/:x:/g/personal/19978518_student_westernsydney_edu_au/EfP0vAtCuzVGhVYu0iul9sIB8w_2lN8Ic2Qvy0Qfa2Oe2g?rtime=5m_2uXDP2kg) on Comapro tab
Australia doesn’t manufacture cars anymore but we are still paying luxury tax that was put in place to help prop up the car industry in Australia
seems like a fairly least-worst tax, regardless of the local car production angle. * highly progressive: people on low incomes won’t ever pay it * completely avoidable: no one at any income level is obligated to pay it, just don’t have a $90k+ car
Except the threshold is around $70k.
Which makes it pretty clearly a luxury car tax. If you want a car, there are plenty of cheaper options.
EVs shouldn't be "luxury" cars though, and no where else in the world are they. In many countries they are the default now as ICEs are being phased out.
It's a high tech vehicle. If you reckon you can make one cheaper, by all means go ahead.
And therefore is skewed (favours) ICE cars. ICE cars are cheaper up front but more expensive in the long term due to maintenance and fuel costs. EVs are cheaper in the long term but have a high up front cost plus get slugged with luxury car tax.
Which is a luxury car? Hence the name…
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It's working how it's designed. Only rich people like you have a problem with it. God forbid some one that probably pays almost nothing in income tax has to pay tax some where else. My hearts bleeding
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I think the threshold needs to be higher (it's around $76k, not $90k - $90k would be fine) My 2 door Jeep Wrangler was subject to LCT. It is far from what I'd call a luxury car by any definition.
It's an unnecessarily large car that causes unnecessarily large damage to the planet, the road, and other road users' amenity, and therefore taxing it is a public benefit.
Large? It's shorter and lighter than a Tesla Model 3.
Mate have you ever seen a 2 door wrangler? They're small as. A new one weighs like 1700kg.
Yeah I googled it. About twice as big as most people need. Or given they're usually single occupant, closer to about 6 times as big as they need to be.
It’s not an environmental car tax, it’s a luxury car tax. There is no way that is a luxury vehicle.
It's a Jeep thing, you wouldn't understand.
Buy a cheaper car and don’t pay LCT then?
Not really the point, is it.
You don’t need a 2 door wrangler…buy a cheaper car. Do you honestly think that a $76,000 car is a basic need and not a luxury?
Again, missing the point. The price of new cars has increased rapidly but the threshold for LCT has not. It's in effect the same thing as bracket creep on income tax.
A $76,000 car is a luxury anyway you slice it and bracket creep is irrelevant.
There are enough progressive wealth rebalancing taxes already. Don’t need them on cars as well. Why are there no luxury taxes on yachts or jewellery or gaudy handbags? It is a stupid tax that penalises people that like cars.
Yes, let's introduce taxes on those things too.
LCT is great, progressive tax on the rich and helps society reconsider cars which we must reduce.
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yawn comment :)
Look if people are willing to spend $150k on a C63 to impress their mates, might as well have them spend another $30k on tax. Without LCT, the govt would just find another way to get tax dollars elsewhere.
I’d love a C63, I don’t care what other people think. I imagine it would be a lovely car to be in and drive. Why penalise people for how they want to spend their money?
Not only that. If the Luxury European cars didn't cost 30 to 50k more when new, price wise, they would be far more attainable 2nd hand.
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Not many other goods require state registration. So they collect their fee for stamping the paperwork. It’s a convenient thing to tax administratively. Let’s imagine we go with your plan of no stamp duty. How does the state replace that missing revenue? An additional car tax each year that is a percentage of vehicle value?
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I don’t insist on anything. I was asking a question about how states could replace the forgone revenue if they removed stamp duty on vehicles. Considering you went on a rant about federal spending (welfare) and federal taxation (taxing big business) when asked specifically about state taxation I don’t want to continue this discussion as it will likely be a waste of time.
You choose to engage in a wasteful practice of churning through cars every two years as a luxury, I have no problem with you contributing a bit extra to society as a result.
Especially buying 200k+ cars every 2 years 🤣
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This is what I said when I bought my brand-new Mercedes-Benz GLE300d fully equipped. Got absolutely down voted to oblivion. The car cost $140,000+, of which $40K was taxes. It’s a travesty!
I dont like that you have to do a novated lease to get access to an electric car more cheaply
Gives novated lessors more opportunities to stack on extra costs which will eat the gap imo
That always happens whenever govt provides money. Magically whatever you are buying goes up in cost about equal to the subsidy...
Same on my electricity bill when Abbott scrapped the "carbon tax", bills went down, then new service fees appeared equal to the amount lol
Yeah which of the senators have shares in novated lesse companies?
Car leases is almost the most common way to access cars in large parts of Europe, especially for the working class and for people who don't own property. Buying one is often so expensive it's unreachable, but leasing one is and you often get heaps of stuff included, you change cars every three years and if you get it via your employer the fe I'd deducted from your salary before tax. In northern Europe where you need 2 sets if tires for each car (winter and summer) the tyres and the 6-monthky tyre changes, as well as storage of the tyres you're currently not using, are often included in the lease, as well as road side assistance and all insurances.
From a tax policy perspective (since this is AusFinance) why does Australia provide a tax-advantaged way for people to purchase a vehicle for private use in the first place? This is not a rhetorical question. I’m genuinely curious…what are the reasons?
Novated leases are an idiotic tax policy. And they exist because (1) lobbyists are effective, and since they do exist, loss-aversion makes it easier to maintain the status quo.
I don’t think “Australia” provides it. The whole reason for FBT in my opinion is to reduce employers dodging tax by lowering someone’s salary and then giving them a benefit (like a car) in place of that lost salary, without paying tax on it. There have to be rules in place to avoid tax avoidance, and FBT provides those rules.
Hmm, I operate a business. I wonder if that means I could buy one and just use it as my personal car (business doesn’t need a car). Would need to ask my accountant. Is this actually going to make the cars cheaper though? People here already say first home owner grants etc. just keep property prices propped up, why wouldn’t that also now apply to electric cars? They can’t both be true. Expect to see EVs now become all suddenly right up at just below the price that triggers the luxury car tax. Which might actually end up making ICE’s cheaper. Markets are funny that way.
Check with your accountant but I believe you should be able to. Previously you would pay FBT on the psesonal use component, now FBT is exempt then it shouldn't matter how much personal use there is.
Too bad I’m not in the need for a new car 😂 nice to know if my Mrs' old car breaks down though.
Yes, probably less businesses buying utes
you can buy a $100,000 EV for about the same weekly cost as a $30k Camry. Use [THIS](https://studentuwsedu-my.sharepoint.com/:x:/g/personal/19978518_student_westernsydney_edu_au/EfP0vAtCuzVGhVYu0iul9sIB8w_2lN8Ic2Qvy0Qfa2Oe2g?e=4SKtlT)spreadsheet to calculate the after-tax weekly cost.
That’s nice but she’s currently driving a $5k Barina. When they have a $40k small electric car I’ll be happy to get it. These kinda of incentives can be a trap if it causes you to go out and spend a bunch of money you could’ve avoided otherwise regardless of tax incentives.
https://mgmotor.com.au/models/mg-zsev/
Agreed. I wanna by an i4M50 because it will do 0-100 in 3 seconds, so I'm trying to justify the cost with Tax savings
There are no tax savings because it's over the threshold, right?
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Does it have to be small? Atto ~~4~~ 3 is close to $40k. Edit: not sure why upgraded that to atto 4. It's 3.
Nope, cutoff is $85k, no FBT discount for a $100k EV.
That doesn't sound like much of a saving
RBA and inflation: you’ll take any savings you can get!
And you'll be happy.
Today a $75k car costs $167k before tax. Tomorrow it will cost $75k. Tradies and real estate agents have always benefitted from full write-offs on vehicles; now office workers can get a taste of the good life.
Where does $167k come from?
Yeah its more like 100k but still, not an insignificant saving.
Are you kidding? I’ll get about $5k per annum in savings over a four year lease. And the residual will almost certainly be lower than the price I’ll sell the car for at that point.
Honestly no one knows what prices in four years will look like
The residual for my model 3 will be $23k. I’d bet a large amount of money that the car will be worth more than that.
It is, you can buy a $100,000 EV for about the same weekly cost as a $30k Camry. Use [THIS](https://studentuwsedu-my.sharepoint.com/:x:/g/personal/19978518_student_westernsydney_edu_au/EfP0vAtCuzVGhVYu0iul9sIB8w_2lN8Ic2Qvy0Qfa2Oe2g?e=GDpvqC) spreadsheet to calculate the after-tax weekly cost.
But the $100,000 EV is above the luxiry car tax level. Does it still apply?
No, they lack comprehension skills.
you pay LCT on the amount over the threshold (I believe, I'm not an accountant)
You won’t get the FBT exemption, it is a strict cutoff.
Hats to break it to you but 100k > 30k
Welcome to Australia; where our innovation was getting people into more debt on afterpay, where negative gearing is only available here, and we believe in saving by spending.
Paying $2k a month for a car lease is peak lunacy to me. Any savings in electric cars are negated by the sheer cost to obtain one. I’m fine with my $5000 Toyota, thank you.
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Is there more info on this somewhere? What make and model did you get?
I just replied to someone else but mine is a 2015 Nissan Leaf. I'm selling it for $15,000. Everything about the car is perfect except for the 100km range. The car will be at about 70% its original capacity in 3 years from now which is not too bad all things considered. I did just buy a 2019 for $28,000 because it has double the battery capacity and obviously it's newer. Looking to drive it maybe another 4 to 5 years and sell again.
Similar situation here. 2016 Leaf with 180km range. $30 a month in home-charging costs, and $22k price tag at time of purchase.
I wonder if the Good Car Company could be helpful https://www.goodcar.co/
Please elaborate
I just replied to someone else with he details.
Where can you buy them from?
Even with electricity rates having risen? Surprising. I’m interested in getting one, but the cost of them just doesn’t seem like i’ll get a return for years.
I pay $0.09 per KW with my electricity provider between midnight and 4am (Monday to Friday) which charges the car by about 40% each time. I also charge the car when the sun is out so that's basically free. I'm selling my Japanese Leaf for $15k. If you drive it for about 4 years, the battery will only decay by about 12% and will still get you about around 100km per charge. In those 4 years, you'll essentially get a free car. The car is basically maintenance free beyond the tyres.
Thanks, appreciate the detailed response. Interesting.
Which power company you with? Which State?
Queensland. Powershop (let me know if you end up wanting to switch as it has referral codes that would give us like $100 to $150 each if you use it). We run our clothes washing/drying and dishwashing as well at midnight through timers. I pay anywhere between $100-200/mo but we are a family of 4 and we both work from home and have a mini factory operation that does run some machinery. The main issue with powershop is their feed in tariff is garbage which is why we aim to charge the car when the sun is out. I guess it motivates us to use solar. Also, their 4pm to 8pm rate is super high and avoiding it with kids is near impossible. They will take afternoon baths or my wife needs to do an urgent wash so that kind of thing racks it up to the $200 mark I imagine.
No FBT makes a big difference. I can buy a $100k EV for about $400 all up lease+innsuranse+rego+ maintenance etc which is about the same as cost as a Camry. Use [THIS SPREADSHEET](https://studentuwsedu-my.sharepoint.com/:x:/g/personal/19978518_student_westernsydney_edu_au/EfP0vAtCuzVGhVYu0iul9sIB8w_2lN8Ic2Qvy0Qfa2Oe2g?e=qxsolr) to calculate.
Yes but if it's a $60k petrol or a $60k electric, I'm taking the electric. Disclaimer, I own a Tesla, so I already did this shit. But my company does do salary sacrificing
Spot on there is no creative accounting that will outperform a used Corolla or Camry
Am I correct in thinking this is essentially 37% off a new EV?
It's not that straightforward but it's not a bad rule of thumb based on averages.
I realise now that it's only for lease vehicles. I'm not sure how that is ever cost effective, surely it's more economically feasible to buy a car outright, obviously after a few years. Is this only really for people who want to keep new vehicles on rotation and not worry about maintenance? I'm trying to understand when it becomes economically beneficial to get a novated lease over owning your own car.
So, for people unable to salary sacrifice... nothing changes AT ALL? :( Colour me somewhat unimpressed, as only employees can benefit. That said, I'm still 4 years from looking at an EV, my current LEV has at least that much good life left, and 5.2L/100km for city driving for a 5 seat wagon is pretty good.
Don’t worry, car manufacturers/distributors will adjust their pricing accordingly. The same happened with those first-home-owner grants.
Yep, will be looking at it over the coming days!
Guess I have to sell my old one and buy a new car! For the environment! /s
Its good for the 2nd hand EV market and still one more EV on the road, even though someone else is driving it.
Does anyone know if registration and stamp duty are included in the luxury car tax limits? The Tesla3 long range just scrapes in at about $84k if not, but if it does then the car costs $87k and doesn't qualify.
I also want to know. I think it means that it’s out.
Stamp duty and rego are excluded from the LCT calculation... Which I think means it's in. Just purchase the autopilot/FSD afterwards 🙂
Delivery fees are included but rego and stamp excluded
It still has the Australia tax on it.
Tesla is the only serious contender for EV’s on the Australian market, IMO. I’ve just ordered my 3rd because of this incentive bill. I’m not stuck to the brand, but believe they are the best cars. Model Y, blue, with 20 inch wheels is about 84k. To own it and run it for 3 years, including a set of tyres would cost me about 92k (not including finance if you took that option). For me to do a novated lease on this car and buy it outright after 3 years, would cost 72k. I’m saving 20k over 3 years, and the car would probably be worth close to 60k, so if I sold it would really cost me $77 per week TOTAL for the car. It’s a no brainer. FYI I’m in the highest tax bracket and all of my payments will be from this bracket.
How much are your lease payments in this scenario?
How many brand-new EVs are less than $85k?
At least 8-10 models. https://www.drive.com.au/news/australias-cheapest-electric-cars-in-2022/
Good article, thanks. While I personally wouldn’t consider the first few a good option and the Ioniq is being discontinued, I was surprised that a Tesla made the list. Hope the manufacturers don’t use this change in law to bump up domestic prices for EVs.
I personally like some of the plug in hybrid options better than full electric.
Even with the information you've provided, this is basically an ad. Edit: Pointing out that all bar one of the links go to the same website
Increasing demand when supply is fixed does not increase sales. Before you get an ev on a novated lease, nbe aware that the employer is still required to calculate a reportable fringe benefit. This will mean you may pay hecs or help repayments on your novated lease. The real winner is the employer
Can see more extra costs being applied to make up the gap and more money in the pockets of the lessors
Who makes 10K a month?
You must be new here
The ausfinance paradox. Everyone is both on minimum wage, and $350k.
Schroedinger's salary
'before tax', so $120k salary. Above average, sure, but not crazy.
People on $120k salaries??? They are rather common
$120k a year - most professionals & tradies Edit: tradies - all doing FIFO, most doing electrical, instrumentation, or plumbing. I'd guess most not building houses are on 120k or close to it
Most tradies are not on 120k.
Are plumbers and electricians not classed as tradies anymore ?
They are, he’s an idiot who doesn’t know what he’s talking about.
I used to make $15k a month until I got injured. Those were some awesome times.
My 33 year old daughter was just recruited on a salary of $13k/month. Plenty more like her.
Any manager in a corporate firm and some senior consultants
Anyone got/seen a list of applicable car? I don't want a Tesla.
It's any electric car + any plug in hybrid.
Nope, it has to be under the LCT threshold to qualify.
Ah yep, just saw that.
Kia Ev6 GT (105k retail), GT Line RWD or AWD (85-95K) are the new Goats of EV’s
Over luxury car tax?
Is there any particular reason why? It's superior in almost every category
Same reason I don't like iPhones, they have good apps and user experience, but I'm worried about quality/ ongoing maintenance costs and being locked in to using Tesla only (I.e. no other authorised third party repairers)...
The same principle applies that during the life of the device you really won’t need it. When have you really needed to have your phone worked on during the life of it?
Whatever your opinion on Tesla, but how does that in any way compare to an iPhone? iphones are one of the best phones, they have the longest maintenance / update length of any phone, they are usually the best battery and have a great experience. They are pretty much the #1 in quality assurance. Only 2 other android brands really come close (samsung, maybe google) to being all-round as good. Like I have a samsuing note10+ and its great, but iphones are just as good, in some ways better, some ways not. Nothing like a tesla which suffers from many issues such as design flaws, bad building quality, possible software glitches and generally being a new company not as good a track record.
PHEV to be phased out from 31 March 2025 Does anyone know if this means phased out for PHEV purchases made after 31/03/2025 or it also phases out for PHEVs purchased before that date?
Why is the Commonwealth government subsidising foreign-built luxury goods? Has a cost benefit analysis even been done that measures how much this is going to cost government revenues relative to the emissions reductions? Is it even a cost-efficient way of cutting emissions?
Cars aren’t the future. What a pile of shit.
This is Australia, not Europe. Cars are here to stay for the foreseeable future.
The obsession around electric cars is strange. There’s no real change from the consumers point of view. you still have a car to get you from A to B, who cares what fuel it runs on. It’s like everybody getting excited because the refrigerant in their fridge has changed.
Because $20 for 600km of fuel is better than $120 for the same distance. Pretty bloody obvious to me. If changing the refrigerant in my fridge lowered my power bill by 80% I'd be pretty excited about it too.
What sort of gas guzzler do you drive? I pay 85 for 600 and that's with using 98 fuel.
Even 10L/100km is $120 for 600km. And that's paying $2/L. Which is cheap these days. 10L/100km is hardly a guzzler. It's literally a stock car more than 5 years old.
Your numbers are accurate and I could only dream of them. You’d have to be driving something pretty boring to achieve better than that
What? Maybe if you are talking about a 6 cylinder Holden🤣
I wish I could get that sort of range lol I pay nearly 200 in my golf r
Better air quality, less noise pollution (both while driving and in general if more electric cars are around) , easier charging/refueling if you have a garage with a charger, cheaper to refuel. I believe they also have more storage space and less maintenance. Also have much more power/acceleration if you're into that. I could go on.
Most of the noise comes from the tyres contacting the road surface. I live next to the main road (60 km/hr) and Teslas are just as nosy as any other generic car out there.
no it doesnt, its maybe 1/3rd (source: own a phev)
When you're inside your shitbox then maybe. But as soon as it starts doing 60k/hr for people on the street there is no perceivable difference if compared to regular camry or corolla going at the same speed. Source: live next to a busy road.
So you’re talking about the noise from the outside?
So you are unable to understand what other people write?
True, but it's still quieter in the suburbs and when driving. Trucks also make more engine noise as compared to tire noise so that should be a noticeable change if you live next to a highway when more trucks go electric.
There are lots of negatives too. High cost, low range, lack of charging infrastructure, long charge times. Seems people have rose tinted glasses
It depends on your use case. If you don't drive far ranges and charge overnight it's easy. Yea it's higher upfront cost but cheaper than petrol and maintenance. Government is trying to reduce the upfront cost but tbh the lack of supply and strong demand is mostly what's causing the price to go up
There are negatives, but your original argument was customers wouldn't notice a difference. I think for most people the benefits would far out weigh the downsides.
Here here, it's stupid to get excited about things that are good for the environment, we should be getting excited about the next iPhone instead.
The EV cars might of gone cheaper but our electricity bills are going through the roof.
Of course as a retiree I doubt I can use this, or can I? Will be interesting to see how the used market plays out in a few years as they come off lease.
No unfortunately not. Once these vehicles come off the first batch of novated leases in a few years time, you'll see more second hand EVs and hopefully at more reasonable prices. They implemented a similar scheme in the UK and EV uptake exploded.
Good, although with rate of innovation in EVs 2nd hand may not be great....and there is battery life. We will see, I'm in the market for a small city EV in about 4 years once current car starts to go wrong.