The changes to Australia’s tax laws late November, exempting electric vehicles from fringe benefits tax, is likely to mean a boom for the novated leasing industry.
The cutting of the FBT on certain EVs is designed to drive up adoption of electric vehicles, particularly among business fleets, by making them more affordable compared with traditional fuel propelled vehicles. And there’s no doubt it will.
The measure will also fuel an increase in everyday employees taking up salary sacrifice arrangements involving electric vehicles, or of novated leases for their first or new electric vehicle.
“There is a lot of excitement in the industry,” said Frank Agostino, managing director at salary packaging and novated leasing specialist Fleet Network, referring to the plethora of articles popping up in mainstream and industry publications talking about novated leasing. “It’s growing some legs. Our reputation is growing as a result of this.”
Articles in consumer-focussed publications are talking about the incredible savings that an employee can get by invoking novated lease offerings from their employer, and that’s stirring interest and inquiry in the benefits of the three-party arrangement.
Certainly, the savings are phenomenal for those interested in switching to an electric vehicle, said Agostino. Under the new tax rules, applied via a novated lease, an employee will be able to get a Tesla 3 or a Tesla Y for the about the same outlay as a Mazda CX5, in the vicinity of $240 a week.
Essentially, novated leasing is a three-way arrangement where an employer agrees to pay the employee’s vehicle finance and running costs to a leasing provider from the employee’s pre-tax salary. The three parties sign a deed of novation, under which the employer takes on all, or some, of the employee’s obligations in their separate lease agreement with a finance company. The deed of novation also guarantees a residual value of the vehicle at the end of the agreement, which the employee can pay to take over ownership, and any future maintenance and other obligations, of the vehicle.
Simply speaking if an employer offers this sort of salary sacrifice option to employees they should look at taking it up if they’re in the market for a new or used vehicle, and now particularly if they are interested in an electric vehicle, said Agostino.
“The best way to sell it is to say, ‘Let’s have a look at a novated lease and how that looks on the car that you’ve got right now,’ and 99 times out of 100 the novated lease will beat the current situation,” said Agostino.
Fleet Network’s own social media campaign in late November yielded a surge in inquiry for electric vehicles, said Agostino.
On LinkedIn, Agostino had posted: “It’s very likely that you spend more than $235 each week on finance, fuel, insurance, registration, servicing, tyres, and maintenance if you have a petrol or diesel vehicle. Under the new government incentive to promote electric vehicles, you can drive a new Tesla for $235 per week.”
He said inquiry in the latter half of November had completely flipped towards electric vehicles versus traditional internal combustion engine vehicles.
“Due to the new tax policy, there has been a significant shift in the way people think about electric vehicles.”
