Purchasing a car privately can save you a few dollars. If you are considering financing your private sale car purchase via a novated lease agreement, there are a number of things to consider.

Benefits

• Normally larger savings than purchasing from a car dealer

Disadvantages

• Normally no manufacturers warranty
• No guarantee of title
• No history of how the car has been driven
• If no service logs available a engine check would be recommended

Taxation Implications

Where the amount financed is below the Depreciation Limit ($57,180), the employer claims the novated lease payment as a business expense. Above the Depreciation Limit, they claim the interest charges and depreciation up to the value of the Depreciation Limit ($57,180).

The amount financed is the purchase price of the private sale vehicle. As it's a private sale, there is no GST claimable from the finance provider.

GST is also charged on the residual value on the lease, and as the Novation reverts back to the employee at the end of the lease, the employee is responsible for paying the GST on the residual.

GST is charged on the monthly novated lease payment and as long as the employer is registered for GST, they can claim this back on their BAS.

Want to find out more?

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