Novated Lease, D1 Car Travel Deductions

Q&A Tax

Question :

Mr. Smith is an employee and has a car under fully novated lease with the employer.

Can he claim the car travel under D1 car expenses?

 

Answer :

If Mr. Smith is being provided with a car under a salary sacrifice arrangement (ie, novated lease
arrangement etc), he will not generally be able to claim any personal tax deductions in relation to the
car.

Firstly, the car expense deduction methods in Division 28 (eg, cents per kilometre method) are only
available if you own or lease the car personally. If the car is owned by the employer or there is a novated lease arrangement under which the employer is responsible for meeting the lease payments
then the employee would not be treated as owning or leasing the car.

Secondly, section 51AF ITAA 1936 broadly states that an employee cannot claim car expenses if a car
has been provided to them (or an associate) by their employer and it is available for their private use.

If Mr. Smith personally pays some car expenses and they are not reimbursed by the employer then
these can potentially be taken into account as an employee contribution and reduce the taxable value of
the benefit for FBT purposes.

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