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Company Car or Car Allowance?

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  • Company Car or Car Allowance?

    Company Car or Car Allowance?
    I thought I would take advantage of peoples experiences good or bad.
    I've been offered another job with perks like National & International travel there's also a Company Car or Car Allowance on offer.
    I've had company cars before back in my copier tech days but never car allowance.
    Thoughts on tax benefits, Traps & the like?
    Would a lease be better than buying etc?
    Oh & before you ask I've already asked if I can use it on a bike & its not really an option.
    Thanks in advance.
    I know I'm paranoid, but am I paranoid enough???

  • #2
    Not sure if this helps, but my company would only pay travel allowance when traveling between jobs/ to a job not for driving into work/ home. At least with a company car they pay (is fuel etc.) for you travel to and from work. My 2c
    Theirs no replacement for displacement

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    • #3
      The key thing to work out is what it will cost you to have exactly the same car as they would give you for free including all costs (loan, fuel, insurance, rego, maintenance tyres etc etc).
      If the allowance is the same or higher than that amount then when the car is paid off, you will be in front by the value of the car at the end of the loan.
      If it is not, then you can claim the 'gap' for the car (against tax) as a write off, but only for the proportion of use associated with business, so you'll have to keep a 3 month log book.

      Car allowances are good if you want a type of car that is not provided, or the car replaces a car that you would have owned anyway. Where you can get caught is if you get greedy and get an expensive car which is isn't covered by the allowance, and your claim rate from tax doesn't pay the difference.
      It's not too hard to work out, but if you have a tax accountant, ask them to crunch the numbers for you, it will be a cheap few hundred to have it worked out rather than making an expensive error.
      And remember that licensing and insurance will change under an allowance as the car becomes 'buiness use' so the rates are different.

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      • #4
        As AndyS as mentioned, get some advice from an accountant before you commit to anything. I've had both company cars & car allowances over the years & personally found the allowance to work better. You also need to bear in mind any FBT that will be applied at the end of each year. I dont know how much it's changed over the years, but with the allowance you were also able to claim depreciation -this makes a big difference. The biggest difference is probably the fact that you can be stuck with the vehicle (through the allowance option) if your situation changes, like quitting or losing your job for whatever reason - this can either be a blessing or a liability. From my personal experience, novating isn't a great option (although it does include your FBT).
        __________________________________________
        To err is human.
        To arr is pirate.

        Check out my 1198s Corse SE in the garage: Desmosedici Ohlins forks, magnesium wheels, Ohlins TTX rear shock, Kyle racing link, alloy subframe, carbon fairing stay, ceramic coated Termi full systen, PCV, lots of carbon & titanium.

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        • #5
          In my experience the "company car" is the most stress free and cost effective option. A car allowance is added straight onto to your income and is fully taxable. You can offset some of this by claiming the business use portion.
          I'll be riding for you #52, my dear son, Cameron Taylor Elliott 1985-2009
          2008 CBR600RR and 2010 GSXR750 Track Bikes, KTM530EXC Enduro bike wrist breaker

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          • #6
            Cheers.

            From what I’ve heard so far & I need to check this is that the car on offer is a lancer or the like shitbox.
            I’m not after anything flash maybe just a Commodore or the like. Secondhand could be an option as long as it’s less than 7 years old.
            Ive had a few company cars before & yeah its easy no worries & the old Konica Commo doubled as a 4wd .
            I know I'm paranoid, but am I paranoid enough???

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            • #7
              it depends on how much driving you are doing for the company and how much they are offering....but a car allowance gives you the chance to get a better vehicle to drive around in as you can claim against tax....
              A site all parents should check regulary
              http://www.mako.org.au/temp_a.html

              (+)

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              • #8
                If you get paid a car allowance it is generally untaxed, so be mindful at the end of financial year that if you can not justify business use vehicle expenses (with full records) up to the full amount of the allowance wou will be getting a bill from the ATO. Company car may also have record keeping requirements and private usage may be taxed via FBT. Unless you do lots and lots and lots of business related travel, get some proper advce as it may come back to bite you

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                • #9
                  Some of the guys here at work have company cars, but since the cars have been sold to custom fleet, majority of them are having their cars taken off them and the value of their cars "car allowance" as a part of their pay checks.

                  One of the guys has decided to not pay tax on the car allowance money, he is getting it put straight into his super, so when he retires and is of the required age, he can access his super without paying tax on it and will have alot extra in there. Bloody good idea.

                  Even thou it might not help you now, might be something else to look at for your future and retirement, if you can afford to do it like that.

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