Can I Claim Car Expenses on a Novated Lease?
If you’ve signed up for a novated lease, you might be wondering whether you can claim car expenses on your tax return. The answer is a little more complex than a simple yes or no. A novated lease is a salary packaging arrangement where your employer deducts your car-related expenses, such as lease payments, fuel, and maintenance, directly from your pre-tax income. This gives you tax savings upfront.
However, because these expenses are already deducted before tax, you generally cannot claim them again when lodging your personal tax return. The Australian Taxation Office (ATO) considers that these expenses have already been covered through salary packaging, so there’s no double-dipping allowed.
Exceptions to the Rule
While you can't typically claim the car expenses for personal use, there are a few exceptions. If you use your novated lease vehicle for business purposes, you may be eligible to claim a portion of the expenses related to that use. This is calculated based on how much of your driving is for work. Keep in mind that you’ll need to maintain a logbook or provide detailed records to justify any claims to the ATO.
Understanding Fringe Benefits Tax (FBT)
It’s important to note that your employer will pay Fringe Benefits Tax (FBT) on the value of the car-related benefits provided under a novated lease. This means you benefit from the car without needing to pay the FBT yourself. In some cases, businesses may use the Employee Contribution Method (ECM), where you contribute to the running costs of the car post-tax, which can reduce the overall FBT liability.
Final Thoughts
In summary, you generally can't claim car expenses on a novated lease for personal use, but if you use the car for business, a portion may be deductible. Always consult with your tax advisor or accountant to ensure you’re claiming correctly and maintaining the right records.
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