What you need to know about the EOFBTY and your novated lease!
What you need to know about the EOFBTY and your novated lease!
The end of FBT year is the time to make sure you get the most out of your salary packaging. But it can also be an important time for your Novated Lease Vehicle!
What is End of FBT year, and how does it affect me?
The ATO requires you to pay a certain amount of Fringe Benefit Tax (FBT) on your novated lease. The amount of FBT is based on the taxable value associated with your vehicle and this must be collected or offset within the current FBT year, 1 April – 31 March. To offset the FBT, an annual amount of post-tax is deducted from your pay. This is known as the Employee Contributed Method (ECM). For most customers, there is nothing they need to do prior to the end of the FBT year as Maxxia will have already taken the appropriate steps to ensure everything runs smoothly. For some customers, especially those recently entering into a novated lease, Maxxia may need to readjust their post-tax contributions to meet ATO requirements.
Collecting your annual amount of Employee Contribution Method (ECM or post-tax)
Rather than pay the FBT directly to the ATO, ECM allows you to reduce the taxable value of your novated lease to zero by contributing your own post-tax funds to the running costs of your novated lease.
This essentially offsets the need to pay any FBT at all, and you can use these post-tax funds for your novated lease vehicle expenses throughout the year.
The funds are simply added to your balance for:
- Monthly lease payments
- Running costs
- Claims for any eligible expenses such as registration and insurances
What is a shortfall?
A shortfall is when Maxxia (for a number of possible reasons) do not receive enough post-tax to offset the FBT applicable on your lease for that FBT year.
A shortfall is not a penalty or fine and can occur for a range of reasons, such as:
- When income is missed and not recovered.
- The lease terminates before its natural end date and there are no pay cycles remaining to collect more post-tax.
- A new vehicle is set-up late in the FBT year and there are no more pay cycles remaining to collect the required post-tax.
If a shortfall is not resolved prior to the end of the FBT year, it will become an FBT liability for your employer, which you are required to pay.
How can I resolve a shortfall?
There are a number of options available to you should we contact you regarding a shortfall:
- You can choose to pay the remaining post-tax amount directly to Maxxia. If Maxxia doesn’t receive your deduction directly from payroll, the funds are simply paid to you through your normal pay cycle instead, so they will be in your bank account. Start by putting aside the amount quoted for your post-tax contribution, which you will find on your novated leasing estimate. The post-tax must be received on or before 31 March. If the post-tax is received after, it will be counted towards the new FBT year.
- You can choose to pay the remaining post-tax amount directly to your Maxxia account. The post-tax must be received on or before 31 March. If the post-tax is received after, it will be counted towards the new FBT year.
- You can claim for Unreimbursed Running Costs which were incurred during the period of the lease, but have not already been claimed and received a pre-tax reimbursement for. This will reduce the shortfall by the claim amount that you have paid. Any claims used for this purpose cannot be claimed in the future.
- You may be eligible to claim Days Unavailable if your vehicle was under repair or where the vehicle was left (with keys) with your employer. Days unavailable can only be applicable if the vehicle was unavailable for 3 days or more (this does not include when you dropped off or picked up the vehicle). Substantiation may be either in the form of a tax invoice from the mechanic showing the date the car was dropped off and picked up, or a letter from your employer confirming that they had the vehicle on site and were in possession of the keys.
If you work in the Health or Charity industries, there may be other options available to you. However it is imperative that you contact us prior to 31 March to discuss your options.
What is a liability?
If we do not rectify the shortfall of post-tax (ECM), the FBT has not been offset and now becomes an FBT liability.
Your employer now has to pay the FBT owing to the ATO and this amount must then be paid by you to your employer. We will contact you to discuss this further and organise payment. Whilst a shortfall can be offset, a liability must be paid.
What happens if I have a liability?
If you were unable to resolve your shortfall prior to the end of the FBT year, you will be required to cover the FBT liability. If this occurs, there are a number of options available to you:
- Depending on your account balance, we may be able to use some of the funds in your vehicle account with Maxxia. Liability amounts up to $100 will be paid automatically from your balance if funds are available.
- Depending on your employer’s requirements, you may be able to pay the liability over a number of pay cycles with pre-tax dollars.
- You can pay the FBT liability directly to Maxxia using post tax funds, who will then send this to your employer on your behalf.
Why do my deductions differ from my proposal?
One of the most common questions at this time of year is why does my contribution amount differ from my original proposal? The answer is that each time we provide you with an estimate we use the remaining pay cycles in the FBT year (ending March 31) to calculate the numbers. As we get closer to March you have less pay cycles and this is why there may be a difference in the estimate we calculated a month ago and the contribution amount you end up starting with.
We have therefore temporarily adjusted your deductions based on how many pay cycles are left and on the pro-rata FBT requirement.
This is to ensure that you do not incur a FBT shortfall. Your deductions will automatically return to the proposed amount from April 1st.
Need more information? Contact our Customer Care Team on 1300 123 123.
Contacting Maxxia during the EOFBTY
While we aim to do our absolute best, the EOFBTY can mean extended call-wait times. We recommend the below options for keeping in touch with us during this time.