Porsche Lease costs

[TwoHeadsTas]

9 hours ago, ArthurK said:

 From my personal experience over the last 28 years of running a business and deducting car expenses you have it pretty much summed up correctly. Either that or my accountant has ballsed it up over this period. 

I have no interest in claiming expenses that will need to be paid back down the track and thus don't deduct my 911 expenses. It's bad enough the asset depreciated and to add insult to injury you need to pay the tax man back all of the claim and the perceived benefit. No thanks. Owning a 911 is a first wold problem making a minor saving on tax won't make or break the amount of tax paid. The savings are insignificant. Say you have 20k of depreciation and expenses you are saving 6k a year on tax. 

I'm sure there are ways to get around it but the structural costs might outweigh the benefits. 

Ps I even talked to my accountant about setting  up a car hire business that buys exotics and I rent a car through this business but the hire business is still restricted by the depreciation issues. The only way this will work is if the depreciating asset is worth $0 in the end. A bit hard to do this on a new Ferrari,  Lamborghini Porsche or McLaren etc that might be held for 3 years.

 

Happy to be shot down if all of the above is wrong or there are ways to play the system

Arthur, the "pay back the tax man" bit really comes if your car is sold for more than the depreciated value, as you add back (some or part) of the depreciation previously claimed.  Obviously this is an issue if you try to  depreciate, say, an air cooled car, or a 996 / 997 and transaxle series where values aren't dropping, whereas if you bought a new Macan, Cayenne and 991 , and probably most newer Boxsters,  I think you'd pretty much be suffering some real depreciation in value.  So, depending on how long you own a car for, and how expensive it is (bearing in mind the depreciation cost limit and FBT values per SimonK earlier), there can be some circumstances where you can make it work.  I guess as generality, this works for the cheaper end of the market best.

However, what I've chosen to do with my 996, is to keep a track of business kms and will claim under the c/km method (under 5000kms claim at 66c/km), as there is no depreciation add back that I can determine under this option.  As our 996 is in joint names, my wife is also using the car for some of her business stuff so she can claim up to 5000kms too. This works even better if you wanted to run a cheap Boxster where the $ claim can be really worthwhile compared to running costs....

[ArthurK]

Its always been my understanding that if I buy a $200,000 car depreciate it over 4 years @ 22.5% per year I am up for the complete tax credit repayment because the car is still worth more than the $57K depreciation limit if I sell it for say $130,000. If this is not correct then happy to be re-educated.

The net result in the end is a very small portion of tax savings vs the depreciation of the actual car. Yes its nothing to be sneezed at over the life of the car and can take some of the hurt away but tax deducting a $80 / $160 / $300K car will not save you tens of thousands in tax per year - at best its 27.5% of the deduction. It is a cynical approach on my behalf but the headaches created sometimes arent worth it. For someone to be dropping Porsche money on cars, the last thing they are thinking about is fuel costs and how much tax they are going to save. 

BUT if you can get some money back, its better than nothing and more power to the ones who have managed to play the system to full effect - I'm all for it. 

 

EDIT: What I am totally clueless on is FBT and the impact on the business / employee. I know when my wife was working in the corporate world her PAYG summary had an FBT figure greater than $10K what does that mean to the business? I assume they paid that to the ATO which then negates all deductible benefits if you own the business?

[smit2100]

2 hours ago, ArthurK said:

Its always been my understanding that if I buy a $200,000 car depreciate it over 4 years @ 22.5% per year I am up for the complete tax credit repayment because the car is still worth more than the $57K depreciation limit if I sell it for say $130,000. If this is not correct then happy to be re-educated.

The net result in the end is a very small portion of tax savings vs the depreciation of the actual car. Yes its nothing to be sneezed at over the life of the car and can take some of the hurt away but tax deducting a $80 / $160 / $300K car will not save you tens of thousands in tax per year - at best its 27.5% of the deduction. It is a cynical approach on my behalf but the headaches created sometimes arent worth it. For someone to be dropping Porsche money on cars, the last thing they are thinking about is fuel costs and how much tax they are going to save. 

BUT if you can get some money back, its better than nothing and more power to the ones who have managed to play the system to full effect - I'm all for it. 

 

EDIT: What I am totally clueless on is FBT and the impact on the business / employee. I know when my wife was working in the corporate world her PAYG summary had an FBT figure greater than $10K what does that mean to the business? I assume they paid that to the ATO which then negates all deductible benefits if you own the business?

In general / 50k feet terms some food for thought is , on the 10k reported in Fringe benefit value on your Mrs  group certificate, her company would stump up effectively  10k in FBT tax (approximately 2 x fringe benefit value x 50%.)  That value of  fringe benefit  is effectively what taxable income at the highest taxable rate that would need to be added to your Mrs salary (gross taxable salary) to pay for those  benefits in after tax dollars.  Yes the businesses can generally claim the cost of providing that benefit, as a deduction, but get dinged the  associated fbt.

Unless your Mrs has say a novated lease, the company will cough up the fbt liability.  If that 10k of fringe benefit value included fbt on a novated lease, her company would novated their fbt liability on the lease car to your Mrs who could pay for that in pre tax dollars (salary sacrifice).  Yes the bean counters reading this  will be saying what abount if not on the top marginal rate, can use after tax dollars to reduce the fbt liability, instead of salary sacrificing in pre tax dollars, but call that a wrinkle when giving a general view at 50,000 feet and not at 0 feet).   

In terms of indirect impact on that reportable fringe benefit value to you and your Mrs, that numbers gets used when assessing threshold limits such as medicare levies, super co - contirubtions, low income tax rebates, private health care rebates, HECS debt repayment levels, child care rebates, child maintenance for divorsee's.   Been on the end of an unpleasant WTF call on a decent ding to a child maintenance adjustment for an employee that wasn't exactly small due to an increase in reportable Fringe benefits value.

Now just a view, but fbt came in because of the baby boomers and a small minority of them earning bugger all in salary and paying bugger all in personnel  income tax, but their businesses, businesses which employed them gave them access to largesse for nothing, eg fancy cars, holidays, long wined lunches, paid for kids private school fees that were free carries to the individuals and the companies were claiming those costs in full or partially against taxable income.  So ATO , pollies got all bent out of shape and said to the businesses if you aren't going to put that stuff in individuals salaries that they would pay tax on and you want the deduction, we are going to ding you as if you did include those benefits in your employees salary packages and we will ding the company instead of the individual for the tax.

Aside, what many businesses don't appreciate is there are circumstances where Company Z can provide a benefit to company X's employee and Company X will have a legal liability to pay the fbt, not withstanding company X didn't outlay a cent or claim a cent and company Z claimed the cost of providing the  benefit in full or in part. At times, best to bring in the bean counter  sitting in the corner at times to the table when  tendering  me thinks.  eg better to go in eyes open than not. Those FBT bills can be nasty if not costed.

[Johnitos2020]

I had a Kia soul for a couple of years and now I can afford a Porsche and I think in about a year I will buy it. Kia Soul is the first car that I bought as I always was renting cars in Ukraine from https://narscars.com.ua/en/lviv-r6 and really enjoyed it because I did not have the possibility to buy a car at that moment and I needed a car for my online shop, so the rental car did save me. Now I have enough money for a Porsche Macan 2017 year and I will buy it as soon as my last client deal will be closed. I am so happy to join the Porsche community and I would suggest you not use a lease for cars, better pay the whole amount if it is possible in your situation. 

[Pweesng]

Something related. Since we are on this topic, perhaps someone can advise me. 
 

my case is slightly simpler. I don’t have residence visa or work visa in Australia but I intend to stay in Australia (coz you guys have the best country in the world). I have an ongoing business which is a subsidiary of a Singapore outfit. 
 

the Australia company will take on a car lease for me (since I can’t do it without a visa) and it will be reimbursed by my company in Singapore which is essentially taken out of my salary. 
 

Essentially the only reason is because I want to buy a car, but can’t get any financing, so the Aussie company takes on the loan for me. 
 

i’m thinking of a novated lease. If it’s a normal financing lease, the car is owned by the company, but reality it’s really my own asset (some calls it liabilities)

 

what would be the best arrangement tax wise for the company and me. 
 

I do pay taxes in Australia, but I’m paying a non resident tax which is 37.5% flat from my first dollar. 
 

thanks in advance 

[ArthurK]

Wouldnt it be easier for you to get the finance in Singapore at next to no cost (when we were living there three years ago finance was down in the 1.x% range) and buy the car outright in Australia? Simply pay back monthly as you would a lease. You are winning on finance and the fact you buy a Porsche in Australia at half the price of Singapore

[Pweesng]

50 minutes ago, ArthurK said:

Wouldnt it be easier for you to get the finance in Singapore at next to no cost (when we were living there three years ago finance was down in the 1.x% range) and buy the car outright in Australia? Simply pay back monthly as you would a lease. You are winning on finance and the fact you buy a Porsche in Australia at half the price of Singapore

Yeah it would. But my company gives me reimbursement for my cost involved in transportation. So I do need to have a financing doc to show them, so they can pay me monthly. Crap eh?

[AlexB7RS4]

On 13/04/2019 at 21:26, Peter John said:

Cash is so cheap that you use someone else’s! 🤣

Correct... If the vehicle doesn't depreciate much or at all - it can make a $150k car (with low-to-no depreciation) cheaper to actually own and run than an $80k car that loses $30k in value over the first 3 years of ownership.

It's been a while, and I did follow the answers on this thread, though I didn't reply. Thanks for everyone for posting. I was really just curious about what kind of prices people were paying for various $ values of vehicles through different lease programs, I have been novating previous (cheaper) vehicles but may not novate the next one. 

A few things to clarify as I've seen a bit on here about FBT and Novated Leasing. FBT on a Novated Lease isn't actually a cost, it's just an offset that you can't claim tax back against. For example, if there is $20k FBT 'payable' that means that you can't tax deduct the first $20k p.a. of the lease cost, it doesn't mean you pay an extra $20k then start the deductions. So a Novated Lease with high FBT may not actually save you anything - if your lease expenses are less than $20k then you can't deduct anything. This is why it's good to load as much of the running costs in as possible to the novated lease as it inflates the amount you can tax deduct.

For me - I run NPV calculations on vehicle options that balance the novated lease vs. mortgage offset (cash) vs. other leases, which is easy enough to do. Then I look at the fortnightly expenses and see what's comfortable as well, and make a decision based on a combination of the overall cost and the regular outgoings. The NPVs are always negative of course, but it gives a value overall on what the total cost is of various options offset against cost of capital that you can compare.

Really I was just wondering about the types of finance costs people are using for their 911s. I know about novating but not as much about other options, and there's limited info online.

[smit2100]

On 12/01/2021 at 13:51, AlexB7RS4 said:

Correct... If the vehicle doesn't depreciate much or at all - it can make a $150k car (with low-to-no depreciation) cheaper to actually own and run than an $80k car that loses $30k in value over the first 3 years of ownership.

It's been a while, and I did follow the answers on this thread, though I didn't reply. Thanks for everyone for posting. I was really just curious about what kind of prices people were paying for various $ values of vehicles through different lease programs, I have been novating previous (cheaper) vehicles but may not novate the next one. 

A few things to clarify as I've seen a bit on here about FBT and Novated Leasing. FBT on a Novated Lease isn't actually a cost, it's just an offset that you can't claim tax back against. For example, if there is $20k FBT 'payable' that means that you can't tax deduct the first $20k p.a. of the lease cost, it doesn't mean you pay an extra $20k then start the deductions. So a Novated Lease with high FBT may not actually save you anything - if your lease expenses are less than $20k then you can't deduct anything. This is why it's good to load as much of the running costs in as possible to the novated lease as it inflates the amount you can tax deduct.

For me - I run NPV calculations on vehicle options that balance the novated lease vs. mortgage offset (cash) vs. other leases, which is easy enough to do. Then I look at the fortnightly expenses and see what's comfortable as well, and make a decision based on a combination of the overall cost and the regular outgoings. The NPVs are always negative of course, but it gives a value overall on what the total cost is of various options offset against cost of capital that you can compare.

Really I was just wondering about the types of finance costs people are using for their 911s. I know about novating but not as much about other options, and there's limited info online.

Re novated lease, Totally unconvinced fbt is not a cost.  On my novated package reports and fortnightly deduction estimates  done on a few cars,  , fbt is one of the biggest line items .Just a view but that commentary appears to be bulltish or you must work for a very generous employer or one that doesn't think much of complying with Fbt legislation.    Surely a tax abiding employer has a fbt liability as soon as they sign a novation agreement with you.  Who pays for that  fbt tax liability  created under a generic novated lease agreement. Here's a another view,  most companies aren't that generous. i.e don't you enter into an agreement with your employer that they flow down that fbt liabily (  aka as a COST) to you,  but you may elect to fund it in pretax dollars)

Ps I funded my p car on one year sale and lease back.  Bought a lemon ( thats what some on here opined before I got the keys). After a good detail, i thought more of a peach and so did the person that did the ppi) The car spent a lot of time in the worshop.( no fbt cost impost ( prorated) whilst on a hoist  right? )  and let's just say the invoices exponentially increased prior to the end of the lease compared to the start . ( well and truly covered my FBT AFTER TAX COST paying those back ended invoices in pre tax dollars ).