Council wants to: Provide employees with choice and flexibility that suit their own needs and preferences. Adopt Best Practice and Industry Standard.

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2 Council wants to: Provide employees with choice and flexibility that suit their own needs and preferences. Be an employer by choice. Adopt Best Practice and Industry Standard. Attract, retain and motivate high performing people. Legislation

3 Full FBT Concessional Non Taxable/Exempt Mortgages Health Insurance Super (12%) Excess Super Cars Investment Loans Mobile Development Travel Laptops Financial Planning Taxis Traditional In-house Bf ts Electronic diaries RPC Novated lease RPC Associate Lease Income Protection LAHFA Professional Subscriptions Complying Self Education Remote Area Benefits 46.5% 15% - 38% 0%

4 Remote Area Rent Assistance: 1. 50% of weekly rent can be paid from pre-tax if the lease is in employees name % of of weekly rent if the employer is the head lessee & employee sub-lessee Remote Area Interest Assistance: 50 % of home loan interest can be paid from pre-tax salary Remote Area Household Fuel: 50 % of gas & electricity bills can be paid from pre-tax dollars Remote Area Travel: 50% of travel costs including airfares can be paid from pre-tax dollars

5 Can be done in-house Offer only those benefits that are effective Use concessionally taxed benefits All those specifically exempt Keep reimbursements to a pay cycle

6 A Tripartite Lease arrangement between the Employee, Council and the Finance Company Employee Council Lease with Novation Lease Payments Finance Company

7 Step 1 Taxable Value - The Contribution Value of Car x Statutory % (x FBT x Gross Up) $30,000 x 20% (x 46.5% x ) = $6,000 ($ 5,761) Step 2 Annual Running Costs Lease ($680/month including GST) $8,160 Registration / CTP $ 730 Insurance $1,200 Petrol $3,400 Maintenance $1,092 $14,582 Less the Contribution $ 6,000 $ 8,582 Less Input Tax Credit $ 746 TOTAL GROSS COST $ 7,836 Someone on a 43.5% tax rate would require $25,809 of pre-tax income to service the running costs.

8 Where possible should be done in-house Use taxable value contributions towards lease payments for novated & associate lease arrangements Use the fully managed approach for Associate Leases Reimbursements to coincide with pay cycles Keep reimbursements to a pay cycle

9 Council Lease Lease Payments Associate (Spouse, relative, family company) Statutory Formula 0-14,000 Kms 26% 15,000-24,999 Kms 20% 25,000-40,000 Kms 11% Over 40,000 Kms 7%

10 Owned by Associate - Spouse, relative, family - Relative - Family company Off balance sheet No property FBT Concessional Benefit Remuneration split to Associate and not to Leasing Company Car goes with employee on termination, retrenchment, retirement. Simple & Approved by ATO IT2509

11 Motor Vehicle value $10,000 Motor Vehicle travels 20,000 km Current FBT rate 46.5% Gross Up Factor %

12 Step 1 Taxable Value - The Contribution Value of Car $10,000 x Statutory % (x x 20% (x 46.5% x FBT x Gross Up) ) = $ 2,000 Step 2 Annual Running Costs Lease ($340/month) Registration / CTP Insurance Petrol Maintenance $4,080 $ 730 $ 950 $3,400 $1,092 $10,252 TOTAL GROSS COST $ 2,000 $ 8,252 Less the contribution Someone on the 43.5% Tax rate would require $18,145 of pretax income to service the running costs.

13 INCOME Lease and running cost payments (from employee s package). $10,252 Less DEDUCTIONS 18.75% 9.0% Running Costs NET TAXABLE POSITION $ 1,875 $ 900 $ 6,172 $ 1,305 Depreciation can be 12.5% or 18.75% (Subject to when first held). Maximum Depreciation cost limit is $57,180. Lease and running costs can be made quarterly or equal monthly payments to ease administration.

14 Wherever possible eliminate FBT administration: Best done by having employees contributing towards the taxable value of benefits. The obvious one is motor vehicles

15 The Rule of 13 Multiply how much you would like to retire on when you turn 65 by 13:» At $75,000/year = $975,000» At $60,000/ year = $780,000» At $50,000/year = $650,000» At $40,000/ year = $520,000 If you intend to retire at 60 years of age the multiple becomes 15, and at 55 years of age it becomes 17. The other rule of thumb sometimes used is, to maintain current lifestyle, 7.5 times current package value.

16 Source: Rempac Council Employee MV Valued $15,000 Travelling 25,000 km per year

17 Source: Rempac Council Manager M.V 1 - $35,000 - Travelling 25,000 km/year - Taxable value $3,850

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19 Ownership controlled by employee. Individual choice of car/s. Off balance sheet. Concessional benefit. Portable benefit.

20 No property FBT is triggered on the difference between the residual value and market value upon sale (TD95/63). Purchase and disposal employee, not employer responsibilities. Employee equity is recognised. ATO ruling IT2509 refers.

21 Motor Vehicle value $30,000 Motor Vehicle travels 20,000 km Current FBT rate 46.5% Gross Up Factor Lease 3 years Residual 40%

22 1. Roll over the lease at the cars residual value. (The Lease period being an individual choice) 2. Trade the car in for a new vehicle 3. Buy out the car at its residual value and either: a. pay for the running costs from after tax salary b. bring the car back into the package using the Associate Lease method 4. Walk away from the lease.

23 A remote area is defined as over 40Kms from a town with a population of 14,000 or more, and over 100Kms from a town with a population of 130,000 or more.