Get on the road with an associate Lease
ASSOCIATE MOTOR VEHICLE LEASES
(ATO REFERENCE: IT2509)
For tax purposes, an associate lease is structured a very similar way as a novated lease, except an associate of the employee (eg spouse, family member) acts as the lessor.
Figure 3: Associated motor vehicle lease
HOW AN ASSOCIATE LEASE WORKS
The associate provides the following costs:
- Finance/loan costs
- Registration and insurance costs
- Roadside assistance/motor vehicle club membership costs
- Maintenance and service costs
An estimate of the number of kilometres (per year) is also required as it will be used to calculate the FBT rate and projected annual fuel cost.
The associate must register for an Australian Business Number (ABN). TRINITAS can facilitate this application process or the associate may directly apply online (www.abr.gov.au).
The associate must also supply their full name, date of birth and tax file number.
The car of the associate will be leased to the employer and made available to its employee as a car fringe benefit. The use of the car by either the employee or their associate is assumed to be for private use.
The associate lease agreement requires an employee to nominate the associate, which can be any of the following: spouse, de facto, family member (over 18 years old), family company/trust.
Any income gained by the associate from the lease payments as part of the associate lease agreement is taxable and must be declared in the associate’s income tax return. However, by deducting all operating cost related to the use of the vehicle, the associate may be able to offset any income earned. Lease payments are determined independent of the relationship of the employee and the associate. The payments will be paid from the employee’s salary package.
DEDUCTIONS
Records of all expenses relating to the operation of the vehicle must be kept including: fuel, depreciation, roadside assistance, maintenance/servicing, registration and insurance. Documentation including tax receipts to support the claim must be kept.