WEBVTT - How Does Novated Leasing Work? 0:00:00.680 --> 0:00:01.000 Hello. 0:00:01.560 --> 0:00:05.040 My name's Santasha Nabananga Bamblet. I'm a proud yr the 0:00:05.160 --> 0:00:08.760 Order Kerney Whoalbury and a waddery woman. And before we 0:00:08.800 --> 0:00:11.440 get started on She's on the Money podcast, I would 0:00:11.520 --> 0:00:14.520 like to acknowledge the traditional custodians of the land of 0:00:14.560 --> 0:00:18.680 which this podcast is recorded on a wondery country. Acknowledging 0:00:18.680 --> 0:00:22.560 the elders, the ancestors and the next generation coming through 0:00:23.040 --> 0:00:27.159 as this podcast is about connecting, empowering, knowledge sharing and 0:00:27.240 --> 0:00:30.600 the storytelling of you to make a difference for today 0:00:31.040 --> 0:00:32.640 and lasting impact for tomorrow. 0:00:33.320 --> 0:00:34.120 Let's get into it. 0:00:34.800 --> 0:00:54.080 She's on the Money. She's on the Money. 0:00:57.840 --> 0:01:00.560 Hello, and welcome to She's on the Money podcast for 0:01:00.600 --> 0:01:04.000 millennials who want financial freedom. My name is Beck Sayed 0:01:04.200 --> 0:01:07.320 and Victoria Divine is with us to talk about something 0:01:07.640 --> 0:01:11.199 many of you listening will know about, but I don't 0:01:11.200 --> 0:01:14.680 know anything about dovated leasing. 0:01:15.280 --> 0:01:18.280 Hello, my friend today. Yes, indeed, we are going to 0:01:18.360 --> 0:01:20.600 run through what it is, how it works, the pros 0:01:20.640 --> 0:01:22.920 and cons, and so much more. I feel like we 0:01:22.959 --> 0:01:26.360 get so many dms on a regular basis, like Hey, 0:01:26.520 --> 0:01:29.360 my work it offers novated leasing. Should I do it? 0:01:29.400 --> 0:01:31.200 And I'm like, well, I can't answer that, but you 0:01:31.240 --> 0:01:34.679 know what I can do to a podcast? Ah, let's 0:01:34.680 --> 0:01:36.680 do it. It's the only thing we've got going for 0:01:36.760 --> 0:01:37.720 us at this point in life. 0:01:37.720 --> 0:01:40.759 Beck, I'm happy about that. Actually, what is a novated lease? 0:01:41.080 --> 0:01:43.440 So anvated lease is a way that you can finance 0:01:43.520 --> 0:01:47.360 a new or used car. You can make your repayments 0:01:47.680 --> 0:01:50.640 from your pre tax salary, which is why so many 0:01:50.680 --> 0:01:54.160 people find it so damn attracting. With approval from your 0:01:54.240 --> 0:01:59.200 employer under what's called a salary sacrifice arrangement, this can 0:01:59.240 --> 0:02:03.560 effectively reduce your taxable income. It also allows you to 0:02:03.600 --> 0:02:06.160 bundle your vehicle's expenses into one simple payment. 0:02:06.520 --> 0:02:10.480 Oh okay, yeah, I'm so you're like, I would love that. 0:02:10.720 --> 0:02:12.600 So how does anvadd lease work? 0:02:12.919 --> 0:02:14.960 So what you'll do is you'll find a new or 0:02:15.040 --> 0:02:18.040 a used car that you want to purchase. You'll decide 0:02:18.080 --> 0:02:20.519 whether it's good. I can't help you with that as 0:02:20.560 --> 0:02:23.320 to what a good car is. You enter into what's 0:02:23.320 --> 0:02:26.040 called a lease agreement with a finance provider or a bank. 0:02:26.560 --> 0:02:29.840 You then enter into what's called a salary sacrifice arrangement 0:02:29.880 --> 0:02:33.200 with your employer to cover the car lease with repayments 0:02:33.240 --> 0:02:36.960 coming from your pre tax salary. You can also sometimes 0:02:36.960 --> 0:02:39.600 include car running costs in your lease, so things like 0:02:39.680 --> 0:02:42.920 servicing back and petrol, which is very attractive because you 0:02:42.919 --> 0:02:46.880 know what's really expensive petrol? Very true. I don't even 0:02:46.880 --> 0:02:49.080 want to talk about it. How salty I get with 0:02:49.280 --> 0:02:52.360 how expensive it is to fill up my entire tank, 0:02:52.400 --> 0:02:55.120 which is a privilege in itself. I know the school 0:02:55.120 --> 0:02:59.560 Sten so expensive school Sten. Anyway, then your employer makes 0:02:59.560 --> 0:03:03.360 repayments to your finance provider on your behalf from your 0:03:03.400 --> 0:03:07.400 pre tax salary. Sure, but if you change jobs, you 0:03:07.440 --> 0:03:10.320 take the card with you and continue to make repayments directly, 0:03:10.560 --> 0:03:13.000 or you transfer your agreement to your new employer. So 0:03:13.040 --> 0:03:15.760 there's a bit of a meaning, boy, And if you 0:03:15.800 --> 0:03:17.640 transfer it to your new employer, you have to make 0:03:17.639 --> 0:03:22.200 sure that your new employer approves it. Okay, And there's 0:03:22.200 --> 0:03:24.480 the probability that they may go, oh, I'm so sorry, Beck, 0:03:24.520 --> 0:03:26.880 we don't offer that. Sure, which is okay because they 0:03:26.880 --> 0:03:29.320 don't have to offer that. I wonder about credit checks. 0:03:29.360 --> 0:03:30.480 I'm sure we'll get to that at some point. What 0:03:30.480 --> 0:03:31.799 do you mean, of course there's a credit check. You're 0:03:31.800 --> 0:03:34.720 speaking out of line of credit. Absolutely, there's the employers 0:03:34.760 --> 0:03:38.040 paying them. Yes, but it's in your name, coming from 0:03:38.200 --> 0:03:41.960 your income. I about them. Yeah, so your employer also 0:03:42.040 --> 0:03:43.640 pays money into your account. 0:03:43.880 --> 0:03:44.080 Yep. 0:03:44.200 --> 0:03:47.160 From the top. What would happen is you've got your 0:03:47.200 --> 0:03:50.560 salary that is allocated towards you. Your employer already takes 0:03:50.600 --> 0:03:52.880 out your tax and pays that on your behalf, so 0:03:52.960 --> 0:03:55.000 you don't have all of the money coming into your account. 0:03:55.000 --> 0:03:56.800 And then you pay tax r like a business would. 0:03:57.200 --> 0:04:00.440 So you pay your tax, they would allocate supranuation to you. 0:04:00.520 --> 0:04:02.840 They would also allocate the money that goes into your 0:04:02.880 --> 0:04:05.680 take home salary, which gets transferred to your bank account. 0:04:05.840 --> 0:04:08.320 And then this would be an additional add on where 0:04:08.320 --> 0:04:11.160 they actually slice some of your take home salary off 0:04:11.480 --> 0:04:14.280 and transfer it to pay off your car lease. So 0:04:14.320 --> 0:04:16.720 it's not as though the lease agreement is with them. 0:04:17.040 --> 0:04:19.880 What happens is the lease agreement is with you, but 0:04:19.960 --> 0:04:23.279 the agreement is that your employer uses your pre tax salary, 0:04:23.440 --> 0:04:26.119 which means it can't come through your bank account. Right, Okay, 0:04:26.200 --> 0:04:28.560 so clear that up. Yeah, But just for the sake 0:04:28.600 --> 0:04:30.279 of people listening, can you give us an example. 0:04:31.080 --> 0:04:31.279 Wow? 0:04:31.440 --> 0:04:33.520 Yeah, I get it, But give us an example just 0:04:34.360 --> 0:04:38.520 for someone you're like somebody that's clearly not me doesn't 0:04:38.560 --> 0:04:42.000 get his all right, So Lert's use the example of 0:04:42.040 --> 0:04:46.240 a seventy thousand dollars before tax salary, right and your 0:04:46.279 --> 0:04:49.560 novated lease payments they come to ten thousand dollars. This 0:04:49.760 --> 0:04:54.360 means that your quote taxable income becomes sixty thousand dollars 0:04:54.680 --> 0:04:57.320 if you pay all your novated lease payments from your 0:04:57.360 --> 0:04:59.880 pre tax salary, So what you actually declared to the 0:05:00.080 --> 0:05:02.360 tax office and pay tax on is sixty thousand dollars 0:05:02.360 --> 0:05:05.240 instead of the seventy thousand dollars, which is arguably very sexy. 0:05:05.640 --> 0:05:09.440 This means you'll obviously pay less tax over that year, 0:05:09.720 --> 0:05:12.599 which is why so many people are attracted to novated leases. 0:05:12.920 --> 0:05:15.760 Your finance provider or an accountant can obviously help you 0:05:15.839 --> 0:05:19.039 work out the potential savings and other things you're going 0:05:19.080 --> 0:05:21.840 to need to consider before entering into a novated lease 0:05:22.120 --> 0:05:25.479 based on your personal circumstances. So obviously, I keep saying 0:05:25.480 --> 0:05:27.440 it's really sexy, and I really need to get a 0:05:27.480 --> 0:05:30.560 better descriptor, but I have none, and I lack a 0:05:30.600 --> 0:05:32.760 lot of creativity, so we're just going to keep calling 0:05:32.800 --> 0:05:35.760 it sexy again and again. But that means obviously you're 0:05:35.800 --> 0:05:40.240 reducing the tax that you pay, but another sexy option 0:05:40.480 --> 0:05:43.200 is that it could drop you down a tax bracket. 0:05:43.839 --> 0:05:46.280 So if you're sitting on what's called a CUSP, which 0:05:46.320 --> 0:05:49.720 is where we know that the average marginal and most 0:05:49.720 --> 0:05:53.279 common marginal tax bracket in Australia is between forty five 0:05:53.320 --> 0:05:56.480 thousand and one dollar to one hundred and twenty thousand 0:05:56.520 --> 0:05:59.400 dollars per annum, which means you pay five thousand and 0:05:59.480 --> 0:06:02.840 ninety two dollars in tax plus thirty two point five 0:06:02.960 --> 0:06:06.440 cents in every dollar over forty five thousand dollars earned. Okay, 0:06:06.640 --> 0:06:11.000 that means that hypothetically, beck if you earned twenty thousand 0:06:11.160 --> 0:06:13.840 and one dollar, it would mean that you fall into 0:06:13.839 --> 0:06:17.280 the tax bracket of paying twenty nine thousand dollars in 0:06:17.360 --> 0:06:21.280 tax plus thirty seven cents in every dollar, which is 0:06:21.320 --> 0:06:23.640 different to the five thousand plus twenty two point five. 0:06:23.680 --> 0:06:25.840 That's a lot of a difference. It means that if 0:06:25.880 --> 0:06:28.600 you then maybe used a structure like this on your 0:06:28.640 --> 0:06:31.640 twenty thousand and one dollar salary and you had no 0:06:31.760 --> 0:06:35.119 vateed lease payments of ten thousand dollars, you would actually 0:06:35.200 --> 0:06:38.240 drop to having a taxable income of one hundred and 0:06:38.279 --> 0:06:40.960 ten thousand dollars, which actually takes you back to that 0:06:41.000 --> 0:06:44.760 thirty two point five cent tax bracket, gotcha, which could 0:06:44.839 --> 0:06:49.080 be very attractive. And obviously it only works in very 0:06:49.240 --> 0:06:52.680 specific circumstances where you know you are on that cusp, 0:06:52.720 --> 0:06:54.719 you're just over and the payments that you're making on 0:06:54.760 --> 0:06:58.040 an ovated lease actually take you down a tax bracket. 0:06:58.240 --> 0:07:00.960 But sure, it's definitely worth looking into. Yeah, like if 0:07:01.000 --> 0:07:04.159 it makes sense for you and your personal circumstances. So 0:07:04.279 --> 0:07:06.200 if it's a lease, is it like a real debt? 0:07:06.400 --> 0:07:08.720 That is a very good question, and yes it is, 0:07:09.240 --> 0:07:12.240 And I think that that's where we need to really 0:07:12.320 --> 0:07:16.080 talk about it. I called it sexy multiple times because 0:07:16.120 --> 0:07:19.160 that's really attractive. Right, it's pre tax Right, we can 0:07:19.160 --> 0:07:21.960 buy a bigger, better car, Beck, we can all go 0:07:22.080 --> 0:07:26.640 get land cruisers. Do we need land cruisers? No, you 0:07:26.680 --> 0:07:28.960 live in the city, you don't need a land cruiser. 0:07:29.200 --> 0:07:31.920 You don't even go four wheeling, Like that's not an option. 0:07:32.080 --> 0:07:33.880 But you mate has one, so you need one. And 0:07:34.000 --> 0:07:37.120 you know what, I guess my work, they often evaded leasing. 0:07:37.480 --> 0:07:40.120 It's a slippery slope of making a decision because you're 0:07:40.200 --> 0:07:43.400 justifying that it's a good financial decision. Yeah, because you're like, well, 0:07:43.440 --> 0:07:47.360 it's pre tax, that's very attractive, and it means like 0:07:47.400 --> 0:07:50.520 you get a more expensive car totally and the money 0:07:50.560 --> 0:07:54.880 would go further. And you're not wrong, But any debt 0:07:55.040 --> 0:07:57.720 that is not creating wealth for you is a bad debt. 0:07:58.120 --> 0:08:00.520 So I would look at an ovated lease as a 0:08:00.520 --> 0:08:03.040 bad debt. Let's see it as a good debt. I 0:08:03.080 --> 0:08:05.040 see it as something that is not helping you create 0:08:05.080 --> 0:08:07.720 future wealth. And I mean there is the argument that 0:08:07.760 --> 0:08:10.440 the car could be worth more when you come to 0:08:10.720 --> 0:08:12.840 get rid of it or dispose it. I don't give 0:08:12.920 --> 0:08:18.840 two flying slippers say it said that. I kind of 0:08:18.840 --> 0:08:20.400 look at it and go no. At the end of 0:08:20.400 --> 0:08:23.720 the day, a car is a depreciating asset. And I 0:08:23.760 --> 0:08:28.080 would hate for people to justify buying more or spending more, 0:08:28.160 --> 0:08:30.720 because ultimately that impacts your take home income, and that 0:08:30.800 --> 0:08:33.679 ultimately impacts your ability to invest and save and create 0:08:33.720 --> 0:08:36.640 financial freedom. And as much as you can justify it 0:08:36.640 --> 0:08:38.240 and be like, oh, we need this, we need that, 0:08:38.400 --> 0:08:42.360 like you arguably don't, right, okay, Like it is a 0:08:42.440 --> 0:08:46.640 luxury to afford a brand new car. Even now I'm 0:08:46.640 --> 0:08:50.280 looking at purchasing a new car. Beck, And you know, 0:08:50.960 --> 0:08:52.719 Steve and I are in a financial position where we 0:08:52.760 --> 0:08:54.800 could afford a brand new car. I could go and 0:08:54.800 --> 0:08:57.360 get a lease on a brand new car tomorrow. I 0:08:57.400 --> 0:09:00.560 can't think of anything worse. I will not be buying 0:09:00.600 --> 0:09:04.760 a car on finance. Is it a good financial decision? Sometimes? Yeah, 0:09:04.880 --> 0:09:07.680 a car lease, especially as a business owner where it 0:09:07.679 --> 0:09:10.080 can be in the business right, like I could novate 0:09:10.200 --> 0:09:13.520 lease my own car. I'm terrified of bad debt because 0:09:13.880 --> 0:09:16.960 I'm not responsible. I can't be held responsible, Beck. So 0:09:17.160 --> 0:09:18.480 at the end of the day, you've got to know 0:09:18.559 --> 0:09:21.280 yourself as well as know the structure. And it's like 0:09:21.320 --> 0:09:24.679 credit cards, right, some people are really good at managing 0:09:24.720 --> 0:09:28.440 credit cards and they use them for cycling through points 0:09:28.520 --> 0:09:30.480 and they get all these business class flights. Like we've 0:09:30.480 --> 0:09:32.840 spoken about Brooke before on the podcast, who is one 0:09:32.880 --> 0:09:37.320 of our team members. She like stealtz credit cards like 0:09:37.400 --> 0:09:40.679 she is the queen of making sure that she's getting 0:09:40.720 --> 0:09:43.439 all of the sign on bonuses and then disposing of 0:09:43.520 --> 0:09:45.920 the credit card or using them in really constructive ways. 0:09:46.679 --> 0:09:48.559 I'm going straight to Lululemon. If you give me a 0:09:48.559 --> 0:09:52.360 credit card. Cannot be trusted, Beck, and that's where you 0:09:52.360 --> 0:09:54.360 should look at an ovateed lease and go, well, actually, 0:09:54.480 --> 0:09:56.800 is this a good financial decision If you need a 0:09:56.840 --> 0:09:59.160 new family car and it's something where you go, Beck, 0:09:59.240 --> 0:10:01.240 we've been meaning to get it, Like the only option 0:10:01.360 --> 0:10:04.320 is going to be you know, a car loan. That's fine, 0:10:04.360 --> 0:10:07.240 This could be a really really valid option that actually 0:10:07.240 --> 0:10:10.760 puts you in the best financial position for taking on 0:10:10.880 --> 0:10:13.760 debt for a car. Sure, and that's great, but it's 0:10:13.760 --> 0:10:15.600 still debt for a car, and we need to see 0:10:15.600 --> 0:10:18.679 it as that, not some shiny benefit that your business 0:10:18.720 --> 0:10:22.040 offers and you can absolutely take advantage of it, Yeah, 0:10:22.080 --> 0:10:24.679 because I think a lot of businesses use it as 0:10:24.679 --> 0:10:27.920 a shiny upgrade, like, oh, well, if you're signing on 0:10:28.080 --> 0:10:30.880 beck one hundred thousand dollars salary package and we do 0:10:30.960 --> 0:10:36.960 novated leasing, Okay, that is great if it applies to 0:10:37.000 --> 0:10:40.320 your circumstance, But more often than not, it's just a 0:10:40.360 --> 0:10:41.520 way to keep you in debt. 0:10:41.960 --> 0:10:45.520 Right, Okay, we keep saying lease. But if you do 0:10:45.559 --> 0:10:47.480 an ovated lease, does that mean you own the car? 0:10:47.679 --> 0:10:47.839 No? 0:10:48.520 --> 0:10:51.600 Oh okay, well the finance company owns the car. Sure 0:10:51.600 --> 0:10:53.920 are then leasing the car from them? Sure? Do you 0:10:53.960 --> 0:10:57.400 actually ever own the car. Beck, Well, technically no, while 0:10:57.400 --> 0:11:00.000 you're running an ovated lease. In fact, you don't actually 0:11:00.120 --> 0:11:02.360 want to own the car because all your tax benefits 0:11:02.400 --> 0:11:06.959 would completely disappear. You okay, the finance company to own 0:11:07.000 --> 0:11:12.600 your car. Okay, So it sounds good, but it doesn't 0:11:12.640 --> 0:11:15.800 necessarily mean it is. I see. So this kind of 0:11:15.800 --> 0:11:18.280 sounds like a hack to get a new car every 0:11:18.320 --> 0:11:20.920 three years. Yeah, that is what a lot of people think. 0:11:21.160 --> 0:11:22.760 So a lot of people go, all right, well, I'll 0:11:22.760 --> 0:11:24.800 get an ovated lease, you never own the car. I'll 0:11:24.800 --> 0:11:27.800 pay my novated lease payments, and then in three years, 0:11:27.800 --> 0:11:29.959 once I'm done that lease, what we'll do is we'll 0:11:29.960 --> 0:11:31.800 go back down to Toyota. We'll get a new car 0:11:32.360 --> 0:11:35.480 that on a ovated lease and start cycle again. So 0:11:35.720 --> 0:11:38.720 you never actually ever own a car that you're paying off. Right, 0:11:38.880 --> 0:11:42.440 it sounds really tax effective, but you're leasing it instead 0:11:42.480 --> 0:11:46.000 of paying the car off completely. There are certain circumstances 0:11:46.559 --> 0:11:50.040 where when your norvated lease has expired, you can purchase 0:11:50.080 --> 0:11:52.440 the car for a discounted rate and it sends up 0:11:52.440 --> 0:11:54.760 being okay, and it would then move into your personal 0:11:54.800 --> 0:11:58.800 name and not have the tax advantages that it previously had. However, 0:12:00.120 --> 0:12:04.400 rocks in their head. Nobody in their right mind needs 0:12:04.440 --> 0:12:07.600 a new car every three years. Controversial opinion. I hope 0:12:07.600 --> 0:12:09.720 my friends aren't listening to this episode because I've got 0:12:09.720 --> 0:12:12.040 a couple of them that literally get a new car 0:12:12.120 --> 0:12:13.959 every three years, because they're like, oh, it's three years old. 0:12:13.960 --> 0:12:18.040 I've got to get rid of it. Clah, My car's 0:12:18.040 --> 0:12:19.959 from two thousand and six. I've been driving it since 0:12:20.000 --> 0:12:22.520 twenty eleven. You will have to pry it from my 0:12:22.640 --> 0:12:25.440 cold dead hands. And I've been talking to my husband. 0:12:25.600 --> 0:12:28.120 The only reason that I would feasibly get rid of 0:12:28.120 --> 0:12:30.480 it is because it's a two door Coupei. Because like 0:12:30.559 --> 0:12:32.400 when I bought it, I thought I was so cool back, 0:12:32.440 --> 0:12:34.600 I thought I was so cool, right, I bought it 0:12:34.640 --> 0:12:39.880 at university and like hot stuff. Two doll Coupei all 0:12:39.920 --> 0:12:42.360 on debt. Obviously, of course all on det But I 0:12:42.400 --> 0:12:44.680 have my two dog, Coupay, and I was very excited 0:12:44.679 --> 0:12:48.079 about I still love her a lot. But the only 0:12:48.120 --> 0:12:49.760 reason I'd get rid of that is because a two 0:12:49.760 --> 0:12:53.880 door Coupei didn't suit our lifestyle anymore, right, gotcha? You know? 0:12:54.200 --> 0:12:56.880 Putting baby seats in the back of a two door Coupei, 0:12:57.400 --> 0:12:59.559 that would be Hell, this is not great. I mean, 0:12:59.679 --> 0:13:03.319 we could make it work technically, but I'm not that stubborn. 0:13:03.720 --> 0:13:07.040 That's obviously my personal opinion. You might think, oh, well, 0:13:07.080 --> 0:13:10.040 I actually do for these reasons, for safety reasons, like 0:13:10.080 --> 0:13:12.240 you could come up with so many good debate. Sure 0:13:12.360 --> 0:13:14.640 to go, but v yes, I do need a car 0:13:14.720 --> 0:13:16.640 every three years. I've done all the maths. I've done this, 0:13:16.720 --> 0:13:18.840 I've done that. At the end of the day, a 0:13:18.880 --> 0:13:21.760 car is a depreciating asset, and if you have one 0:13:21.800 --> 0:13:23.880 and you completely pay it off and then you run 0:13:23.920 --> 0:13:26.920 it into the ground, that will arguably, always, always, always 0:13:26.960 --> 0:13:29.760 be a better financial decision. Then you're getting a new, 0:13:30.000 --> 0:13:31.760 shiny car every three years. 0:13:31.840 --> 0:13:32.040 Yep. 0:13:32.360 --> 0:13:35.200 You can't argue that. Cannot argue that your values might 0:13:35.200 --> 0:13:37.560 be different. And that's totally okay, Like that is so 0:13:37.679 --> 0:13:41.240 fine if you go. But b I am such a 0:13:41.280 --> 0:13:44.640 petrol head. I love cars. Cars are my thing. Like 0:13:44.720 --> 0:13:47.080 every three years, I get a new one. I am 0:13:47.200 --> 0:13:50.319 so car proud, Like you're the dude or the chick 0:13:50.520 --> 0:13:52.640 down at the car wash every Saturday morning, Like you 0:13:52.679 --> 0:13:54.800 go your little chammy out in buff and your car up, 0:13:54.960 --> 0:13:57.240 like that's your favorite thing in the entire world. You 0:13:57.280 --> 0:13:59.760 sacrifice other things in your life so that you can 0:13:59.760 --> 0:14:02.240 have that. I'm not gonna argue with your values. That's 0:14:02.280 --> 0:14:03.800 what I am going to do is make sure that 0:14:03.880 --> 0:14:07.240 you're as educated as possible so you know the ramifications 0:14:07.240 --> 0:14:08.800 of the decision that you're making, and then you can 0:14:08.800 --> 0:14:11.520 still make it. That's fine as long as you've got 0:14:11.520 --> 0:14:14.280 the education behind you so that you go. You know what, 0:14:14.520 --> 0:14:16.920 I don't care like some things in life are wastes 0:14:16.920 --> 0:14:19.120 of money. Yeah, you know what's a waste of money? 0:14:19.160 --> 0:14:23.560 My eyelash extensions. Am I still gonna get them? Absolutely? 0:14:23.920 --> 0:14:27.040 Because I feel real hot when I have them back? Absolutely? 0:14:27.640 --> 0:14:30.280 Does that mean that everyone always has to make the 0:14:30.400 --> 0:14:34.280 best possible financial decision. No, no, but you have to 0:14:34.280 --> 0:14:36.120 make it in line with your values, and you have 0:14:36.160 --> 0:14:39.600 to be educated to know that the decision you're making 0:14:39.800 --> 0:14:41.280 might not be the best one, but it's the best 0:14:41.280 --> 0:14:41.720 one for you. 0:14:41.800 --> 0:14:44.240 Speaking of education, what are some of the benefits of 0:14:44.280 --> 0:14:46.760 nevated leasing? With anovated lease, you can use your car 0:14:46.800 --> 0:14:49.480 for personal use, which is quite helpful. You don't just 0:14:49.520 --> 0:14:51.480 have to be using their car for like business or 0:14:51.520 --> 0:14:54.960 work purposes, which I think is a common misconception. Your 0:14:55.000 --> 0:14:58.000 income the cost of your car and ongoing running costs 0:14:58.000 --> 0:15:00.440 each year will actually decide how cost of efective a 0:15:00.480 --> 0:15:03.720 norvated lease might actually be for you. The result will 0:15:03.760 --> 0:15:07.520 be that your taxable income is reduced. The benefits also 0:15:07.600 --> 0:15:10.440 depend on the way that your lease is actually structured BECK. 0:15:10.800 --> 0:15:14.800 Some leases might package car expenses like registration and fuel 0:15:14.840 --> 0:15:17.920 and tires and insurance together, so your repayments cover all 0:15:17.960 --> 0:15:21.400 of these as well, whereas some employers may also allow 0:15:21.480 --> 0:15:23.800 you to pay part of your norvated lease from after 0:15:23.960 --> 0:15:25.120 tax dollars. 0:15:24.880 --> 0:15:28.440 Which is called an employee contribution. If you're not on 0:15:28.480 --> 0:15:30.920 the highest marginal tax rate, this can actually be cost 0:15:31.000 --> 0:15:34.520 effective because fringe benefits tax, which is based on the 0:15:34.640 --> 0:15:38.040 highest marginal tax rate BECK, may not have to be 0:15:38.080 --> 0:15:40.640 paid to your employer from your pre tax salary in 0:15:40.680 --> 0:15:45.200 addition to your norvated lease for payments, nervated leases can 0:15:45.240 --> 0:15:49.200 effectively mean motoring costs are goods and services tax free, 0:15:49.800 --> 0:15:54.160 so GST free for employees. The GST you would ordinarily 0:15:54.200 --> 0:15:56.720 pay on the purchase price is covered by the finance 0:15:56.760 --> 0:15:59.920 provider and they can claim an input for tax and GSD, 0:16:00.120 --> 0:16:02.840 by the way, is ten percent. If running costs are 0:16:02.920 --> 0:16:06.360 included in your novated lease. These can actually be packaged 0:16:06.360 --> 0:16:09.480 to employees with their lease payment without GST, as the 0:16:09.520 --> 0:16:12.960 employer claims the tax component back as an input tax 0:16:13.000 --> 0:16:16.520 as well. I see. Okay, just means again, you know 0:16:16.560 --> 0:16:19.960 how we talk about like franking credits and stuff. Things 0:16:20.000 --> 0:16:22.400 have little tickets on them to be like by the way, 0:16:22.440 --> 0:16:24.520 this one's tax free, or by the way it comes 0:16:24.600 --> 0:16:27.680 with this certain benefit and input tax credit is the 0:16:27.720 --> 0:16:31.080 same as that, but it's for a business. Okay. Yeah, 0:16:31.080 --> 0:16:34.000 So like GST is kind of like left pocket, right pocket. 0:16:34.160 --> 0:16:37.640 Like when you're a business owner, you pay GST and 0:16:37.680 --> 0:16:41.040 then you also get GST, but all the GST that 0:16:41.080 --> 0:16:43.720 you collect actually gets paid back to the government, So 0:16:43.800 --> 0:16:46.120 it's like I charge it, but that doesn't come into 0:16:46.120 --> 0:16:49.560 play with my profit. Whereas for you, beck, as a consumer, 0:16:49.880 --> 0:16:51.200 when you go to the shops and you buy a 0:16:51.200 --> 0:16:53.960 new drink bottle, for example, there will be a goods 0:16:54.000 --> 0:16:57.320 and services component that you pay, but you can't claim 0:16:57.360 --> 0:17:00.920 that tax time. This changes that circumstance. So someone in 0:17:00.960 --> 0:17:04.160 the background is making the GST effective for you, which 0:17:04.200 --> 0:17:07.080 is kind of attractive. Yeah, I love that. Also, last 0:17:07.080 --> 0:17:10.520 point on this, like in the pros area is compared 0:17:10.560 --> 0:17:12.960 to other kinds of finance like a direct car loan, 0:17:13.000 --> 0:17:16.080 an ovated lease gives you a few different options for 0:17:16.200 --> 0:17:18.520 what you do when the lease term ends. So you 0:17:18.520 --> 0:17:20.800 can pay off the residual so that you then own 0:17:20.920 --> 0:17:23.600 the vical like we're talking about before. You could renew 0:17:23.640 --> 0:17:26.720 the lease for a longer term, either with the same vikel, 0:17:26.800 --> 0:17:29.440 or you could upgrade, like you were explaining every three 0:17:29.480 --> 0:17:32.159 is you could upgrade to a new car, or alternatively, 0:17:32.280 --> 0:17:34.640 you could sell the car and pay the residual off 0:17:34.680 --> 0:17:37.520 to the financer, and then any profit you make is 0:17:37.560 --> 0:17:42.600 actually yours to keep. That's free. That's pretty cool. Yeah, Okay, 0:17:43.400 --> 0:17:45.800 now I know it's not all pros. So we need 0:17:45.840 --> 0:17:47.880 to bring the mood in here to you need. 0:17:47.840 --> 0:17:49.760 To bring the mood down. What are some things we 0:17:49.800 --> 0:17:51.920 need to consider when it comes to novated lea. 0:17:52.119 --> 0:17:54.320 So the first thing I'd want you to consider is 0:17:54.359 --> 0:17:57.760 that if you are going to change employer or change 0:17:57.760 --> 0:18:00.439 your job or stop working, the responsibility for making the 0:18:00.520 --> 0:18:04.080 repayments that still remains with you shall remain with the 0:18:04.119 --> 0:18:06.760 employer you set it up with. You might be able 0:18:06.760 --> 0:18:09.840 to transfer your lease to a new employer if they 0:18:09.920 --> 0:18:12.639 actually offer novated leasing, and it is a bit of 0:18:12.640 --> 0:18:15.240 work to set it up. But you might also want 0:18:15.280 --> 0:18:18.000 to just take over the repayments completely, which would mean 0:18:18.040 --> 0:18:20.480 that they are no longer pre tax than our post tax. 0:18:20.640 --> 0:18:22.240 But you can just keep paying off the lease. It 0:18:22.320 --> 0:18:25.920 just means it would be more expensive technically, gotcha. When 0:18:25.920 --> 0:18:28.480 you have a car under a novated lease with your employer, 0:18:28.680 --> 0:18:32.160 the federal government considers it to be a fringe benefit, 0:18:32.600 --> 0:18:36.680 so then fringe benefits tax might apply. So while employers 0:18:36.680 --> 0:18:39.840 are liable to pay fringe benefits tax, in the case 0:18:39.880 --> 0:18:43.159 of novated leases, this cost is generally then passed on 0:18:43.240 --> 0:18:47.000 to you to pay from your pre tax salary because 0:18:47.000 --> 0:18:48.880 the employers are kind of like, well, this is all 0:18:48.880 --> 0:18:51.959 benefiting you. Why would we pay a different tax on 0:18:52.000 --> 0:18:54.800 your behalf when it's you incurring it directly because you 0:18:54.840 --> 0:18:58.000 wanted a car. It's also really important to understand how 0:18:58.119 --> 0:19:01.880 this and any other financial imployers arising from entering into 0:19:01.920 --> 0:19:04.480 an ovated lease can impact you. So I guess my 0:19:04.600 --> 0:19:07.199 last point, Slash, it's not a con but it's a 0:19:07.240 --> 0:19:09.440 point is if you're going to do it, please just 0:19:09.480 --> 0:19:12.439 talk to your accountant or a financial advisor or someone 0:19:12.480 --> 0:19:13.840 in the know so that you can look at all 0:19:13.880 --> 0:19:16.360 the personal pros and cons and what it actually means 0:19:16.400 --> 0:19:19.199 for your financial situation, because, as I said, I just 0:19:19.200 --> 0:19:21.960 think people get a bit like really excited about it 0:19:22.000 --> 0:19:25.480 because it's such an attractive option and like obviously, innovated 0:19:25.560 --> 0:19:27.480 leasing companies have spent a lot of money on their 0:19:27.480 --> 0:19:29.800 marketing to be like, Beck, this is such a tax 0:19:29.800 --> 0:19:33.000 effective thing for you. You're basically making money and then 0:19:33.280 --> 0:19:35.360 does look pretty sweet. Yeah, but then you go down 0:19:35.400 --> 0:19:38.240 to Toyota or whatever. We're not sponsored by Toyoda. I 0:19:38.320 --> 0:19:41.080 walk past a Toyota dealership most days, so it's just 0:19:41.119 --> 0:19:44.879 like the one in my fresh haird right. Anyway, you 0:19:44.920 --> 0:19:47.480 go down to Toyota and like maybe you had planned 0:19:47.520 --> 0:19:50.359 to get like you know, the base model of like 0:19:50.440 --> 0:19:54.040 a camera or something that makes sense for your financial situation. 0:19:54.600 --> 0:19:56.560 Then you're kind of like, oh, what's the matter, Like, 0:19:56.680 --> 0:19:59.520 let's get the luxe version I deserve it. Yeah, it's 0:19:59.520 --> 0:20:02.840 all online. Thenovated lease anyway, sure doesn't matter, does it 0:20:02.920 --> 0:20:05.960 back or come out in the wash? No, We're making 0:20:06.000 --> 0:20:10.040