Tax Planning Strategy 1 | Salary Packaging Private Motor Vehicle Expenses
When a motor vehicle is used 100% for private purposes there is normally no tax deduction available on the expenditure. With this strategy an employee can generate annual tax savings of $2,500 – $3,000 pa by salary packaging their private motor vehicle with their employer.
The tax savings result from the motor vehicle tax concessions available under the Fringe Benefits Tax Act and also the GST savings on the motor vehicle expenses incurred. This will involve the employer owning or leasing the motor vehicle and providing the motor vehicle to the employee as a fringe benefit as part of the employee’s overall salary package. The employer ensures the employee’s overall salary package doesn’t increase by reducing the employee’s cash salary paid to cover the motor vehicle and fringe benefits tax costs. As such, it should also be used to salary package a spouse or children’s motor vehicles if they are used for private purposes only.
"You’d be stupid not to try to cut your tax bill and those that don’t are stupid in business"
- Bono: U2