Am I really able to receive a tax benefit on a motor bike?

The simple answer is yes! Like all novated leases, FBT is still applicable.

What is a Novated Bike Lease?

The same principles apply as a standard Novated Lease for a motor vehicle, except FBT is treated differently. Now receive a taxation benefit for your favourite motor bike while using your pre-tax salary.

A Novated Lease is a three way agreement between the following:

• Employee
• Employer
• Finance provider

Employee

The employee leases the motor bike directly from a finance provider and enters into a separate novation agreement with the employer who agrees to cover the bike lease payments and in some cases, all other associated expenses during the period of employment. Liability for the motor bike continues to reside with the employee.

Novated leases allow employees to select the motor bike of their choice and retain the motor bike even if their employment situation changes.

Employer

It's the employer's responsibility to ensure the monthly novated lease payments are paid to the finance provider out of the employee’s gross salary.

Finance Provider

The Aussie Chief can recommend some of the best lenders and banks in Australia.

Who is eligible for a Novated Bike Lease?

A Novated Bike Lease is available to all employees where the employer allows their staff the option of leasing a motor bike as part of their salary package.

How does a Novated Bike Lease work?

The employee selects the motor bike of their choice and, subject to credit approval, enters into a financial arrangement with a finance lender or bank.

The most common form of Novated Bike Lease arrangement is a finance lease where the employee enters into a commitment to make monthly bike lease payments and fixed residual at the end of the bike lease. The residual is an amount that is set by the Australian Taxation Office (ATO).

Under the Novated Bike Lease agreement, the employer assumes all the employee's rights and obligations under the bike lease, including the responsibility for making the bike lease rentals while the employee remains employed by the employer. The finance lease remains in the name of the employee who remains the registered owner throughout the Novated Lease and keeps effective control of the motor bike at all times.

If the employee leaves the company, the Novated Bike Lease agreement expires immediately and the motor bike remains with the employee. In this situation, the employee generally takes over the payments or gets another employer to novated the finance lease again.

FBT for motorbikes

The legislation does not require the same level of detail as is required for valuing car benefits. This takes into account the type of vehicles involved, their expected high business use, and their general lack of suitability for significant private use.

Detailed logbook requirements of the kind specified for calculating the value of car benefits are not required for vehicles other than cars. However, many businesses would maintain some form of logbook records and these should be used, where possible, in determining the extent of private use of the vehicle.

In the absence of such records, soundly based estimates of the number of private kilometres travelled are acceptable. For example, you could determine the home to work component of private use by multiplying the number of journeys during the year by the distance between the employee's residence and place of employment. There are two methods for for valuing the benefit.

• operating cost method
• cents per kilometre basis

The following rates are for the 2005, 2006 and 2007 FBT years

The methods assume that you provide the vehicle on a fully maintained basis, including fuel. Where it is the employee's responsibility to provide fuel, the value of the benefit is based on the operating costs, excluding fuel. If the cents per kilometre method is used and there are no specific records, it is acceptable to multiply the number of private kilometres travelled by the estimated fuel costs per kilometre (based on average fuel costs and average fuel consumption of the vehicle) and reduce the value of the benefit accordingly.

Want to know more?

Complete The Aussie Chief's friendly enquiry form and we'll get an experienced novated bike leasing consultant to call you within a few hours. What could be easier?