Breaking down your novated lease costs
The cost of a novated lease can look complicated at first glance. We’ve broken down the costs and considerations that we factor into a TFM novated lease, so you can understand the lease costs that are being funded by your salary deductions (pre-tax and post-tax). These costs can be summarised into five categories: novated lease costs , vehicle running costs (or services), compensation for employer GST liability on employee post tax contribution, income tax luxury vehicle adjustment (if applicable) and end of lease choices.
1. Novated lease costs
We factor in the following costs and considerations when calculating your salary deduction amounts:
The cost of the car
This can include dealer delivery charges, options, accessories, purchase stamp duty, first year registration, CTP financed and Luxury Car Tax (LCT).
– We can negotiate this cost on your behalf.
– TFM can recover the GST content on vehicle purchase, (though TFM GST recovery on luxury vehicles is capped), thus reducing the novated lease payments.
Lease term
– TFM offers a choice of lease terms ranging from 12 to 60 months. The length you choose will influence your novated lease payments.
Interest rate
– As part of TFA, we have access to our own funding and continually monitor the market to make sure you get a competitive deal.
Residual value
– This is the estimated value of your vehicle at the end of the lease term. In a TFM novated lease, residual value is calculated with reference to the Australian Tax Office’s residual value guidelines.
Please note: You cannot use a deposit or trade-in to reduce the novated lease payments.
2. Vehicle running costs (or services)
We take the hassle out of managing your vehicle’s running costs with our range of management services. Running costs covered in your salary deductions include fuel, servicing and maintenance, tyre replacements, registration and insurance renewals. These costs are based on your lease term and the nominated number of kilometres you’re likely to travel.
Fuel card/charge card
Petrol, hybrid & diesel vehicles
Enjoy the convenience of cashless motoring with a TFM Motorpass Fuel Card. It’s a smart way to buy fuel, and you’ll enjoy discounts on the pump price^.
Electric vehicles
Recharge with our partner, Chargefox. You’ll receive a Chargefox Card to use with Australia’s largest public network of chargers.
Service, maintenance and tyres
TFM reviews and approves servicing or maintenance costs before the mechanic starts work on your vehicle. This helps ensure the price is fair and within your budgeted allowance.
We have an extensive approved repairer network that allows us to:
- Negotiate substantial discounts on labour rates and spare parts.
- Enforce and protect warranty claims.
- Accurately forecast service and maintenance costs.
- Provide an extensive repair and service network.
- Ensure that like-for-like, manufacturer-specified parts are used.
- Prevent over-servicing while maintaining your car to the highest standard.
Registration and CTP insurance
Your novated lease includes registration and CTP insurance renewals. Your ongoing registration renewals will be paid as part of your lease, unless you instruct TFM otherwise.
Comprehensive Motor Vehicle Insurance*
Whether you choose Comprehensive Motor Vehicle Insurance in your novated lease through TFM or your own insurer, TFM includes this in your novated lease budget and can arrange reimbursement or payment on your behalf. Please note, it’s your responsibility to ensure that your car is insured for the life of the lease.
Renewal management
One of the benefits of a novated lease with TFM is that we take care of renewing your registration and will remind you well in advance about any upcoming registration, CTP, and comprehensive insurance renewals. If you have your own comprehensive insurance, TFM will notify you of your renewal due date and assist you with the payment or reimbursement process. Please remember that it is ultimately your responsibility to ensure that the car is registered and insured for the entire duration of the lease.
Roadside assistance
If you want the reassurance of roadside assistance or motor club membership, you can include these costs in your novated lease.
Reimbursement
All personal vehicle-related costs such as re-registration and insurance can be reimbursed simply by downloading a Vehicle Expense Claim form here.
Fees and charges
TFM charge an establishment fee and ongoing monthly management fees to cover the cost of managing your lease and vehicle administration. Variation fees and reimbursement fees may apply if there are excess requests for reimbursement or if you want to change your agreement.
3. Compensation to the Employer for GST liability on employee post tax salary deductions
Under GST law, your employer is deemed to make a GST taxable supply and incur a GST liability on all post tax employee salary deductions.
The employer GST liability is 1/11 of the amount of a post-tax salary deduction.
Employee’s compensate their employer by way of additional pre-tax sacrifice for this employer liability, given an objective of novated leasing is not to impose additional costs on employers and keep employers in a net cost neutral position.
4. Income tax luxury vehicle adjustment (LVA) (if applicable)
If the leased vehicle is a luxury vehicle for income tax purposes, there are income tax detriments for commercial employers in entering the luxury lease that are not present with non-luxury vehicles.
To keep the employer cost neutral, additional pre-tax sacrifice is obtained from the employee to compensate the employer for these detriments.
5. End of Lease Choices
In TFM Novated Finance Leases employees carry a residual value indemnity obligation to TFM.
For discussion of residual value indemnity and an employee’s choices at lease term end and their cost implications see What happens at the end of a TFM novated finance lease?
