There are several benefits to novated leases, and today we are going to focus on the ongoing tax savings associated with salary packaging the running costs. Having a novated lease allows you to salary package running costs through your pre-tax every pay day, reducing the amount of PAYG tax that you pay at the same time. Once those payroll deductions have been taken, they are used to pay for and reimburse the running costs for your car.
It sounds really simple, but if you have a novated lease please ensure that you claim all of your running costs for reimbursement. This is the crux of what your budgets are for and the payment and reimbursement of any expense is the final part of you receiving the tax benefit of a novated lease.
An important part of having a novated lease is understanding your budgets, balances, and the claims process.
When Prosperity establishes a budget for your new car, we take into account a range of factors such as, the finance payments, statutory costs such as registration, CTP and insurance, the warranty maintenance schedule for your specific car, and your estimate of intended annual travel. All of these things affect the amount we need to deduct from your pay to ensure that when an expense becomes due, there are sufficient funds in your account balance to cover them.
Some car expenses are paid directly from your balance, like your finance payment which Prosperity makes on your behalf. Fuel, servicing, tyres, and roadside assistance expenses are typically charged against your WEX Motorpass card, which in turn also gets charged against your balance. Some expenses get paid for directly by you the driver, and Prosperity then reimburse you from your account. These typically include expenses such as registration and CTP costs, and comprehensive insurance, but can include any other vehicle running costs not charged to your WEX Motorpass card.
The process for lodging an expense reimbursement claim is really simple, either via our web app or our website. Once you are on the website or app, log on to our Smart Drive secure portal and check your account balance, then select the expense reimbursement tab. Upload a photo of your paid tax invoice/receipt, enter the amount and confirm the bank account you want Prosperity to make your reimbursement to then submit – it’s that easy!
The process of setting accurate running cost budgets and subsequent payroll deductions is to allow your account to accumulate enough funds every year, so they are available to pay or reimburse you when these expenses become due. So, if you are aware that you’ve had a change in circumstance and are travelling further than originally budgeted for or have had a much larger expense put through your WEX Motorpass card than we initially calculated for you, it is worth reaching out to our team to review your account. That way we can work with you to ensure your account always has balance for when your expenses need to be paid for and reimbursed.
So, don’t forget to claim all of your car running costs, and happy Smart Driving!