Car allowance with job.
  • Register
  • Help
Results 1 to 20 of 20
  1. #1
    Fellow Frogger! tasie C5's Avatar
    Join Date
    Nov 2010
    Location
    St Helens Tasie
    Posts
    598

    Default Car allowance with job.

    A job with a car allowance opens all kinds of possibilities. What is the best option for an employee with an annual car allowance of $12,000.
    My son has just secured a position that provides this option. He thought that a DS3S could be a good satisfying car to drive with reasonable economy. He could of course opt to keep his old car and make the most of the allowance. I am at a loss to advise as to the best option. I assume there are forum members who have the best advice. The temptation of having a new car is great.
    Is there a BEST PLAN???
    Allan.

    Advertisement

  2. #2
    Fellow Frogger
    Join Date
    Jan 2004
    Location
    Sydney
    Posts
    9,670

    Default

    Best option ... Convert it to super contributions and keep the old car.

  3. #3
    1000+ Posts robmac's Avatar
    Join Date
    Nov 2004
    Location
    Melbourne / Caulfield
    Posts
    18,731

    Default

    Quote Originally Posted by David S View Post
    Best option ... Convert it to super contributions and keep the old car.
    I would suggest it depends on your Son's age. Super is not a good option IMO for a younger person. Mainly because the money is "locked up" for such a long time and also subject to the whim of the government with likely changes over the long term.

    I'd also suggest a young person has different needs , like purchasing a house and enjoying life than planning retirement. He has time for serious Super accumulation later in life.

    The question is best answered by a someone who is up to speed with his financial and taxation position IMO.

  4. #4
    Sans Pond. STALLED's Avatar
    Join Date
    Oct 2003
    Location
    Sydney
    Posts
    2,863

    Default

    $12k is a fair bit for a car allowance!

    Read the contract of employment - some mandate the use of a new car as part of work duties e.g your boss wont want you rocking up on site in a 1989 Nissan Pintara as it sets a bad image.
    2005 Renault Clio 182 Cup

    2011 Renault Megane 250 Cup Trophee - Sold

    1997 Peugeot 406 2.0 Manual - On Loan

    2004 Citroen C3 1.4 80th Anniversary (RIP)

  5. #5
    Real cars have hydraulics DoubleChevron's Avatar
    Join Date
    May 2000
    Location
    Ballarat,Vic,Aust.
    Posts
    16,322

    Default

    Aren't you supposed to go by a Prado ?? You know so you can be unique like everybody else
    'Cit' homepage:
    Citroen Workshop
    Proper cars--
    '85 Series II CX2500 GTi Turbo I
    '63 ID19 http://www.aussiefrogs.com/forum/citro%EBn-forum/90325-best-project-car-you-have-ever-seen.html
    '72 DS21 ie 5spd pallas (last looked at ... about 15years ago)
    '78 GS1220 pallas
    '92 Range Rover Classic ... 5spd manual.

    Yay ... No Slugomatics


    Modern Junk:
    '07 Poogoe 407 HDi 6spd manual

  6. #6
    Fellow Frogger! tasie C5's Avatar
    Join Date
    Nov 2010
    Location
    St Helens Tasie
    Posts
    598

    Default

    Thanks for the suggestion Shane. He is interested in DS3 D Sport.

  7. #7
    Fellow Frogger
    Join Date
    Jan 2004
    Location
    Sydney
    Posts
    9,670

    Default

    Quote Originally Posted by robmac View Post
    I would suggest it depends on your Son's age. Super is not a good option IMO for a younger person. Mainly because the money is "locked up" for such a long time and also subject to the whim of the government with likely changes over the long term.

    I'd also suggest a young person has different needs , like purchasing a house and enjoying life than planning retirement. He has time for serious Super accumulation later in life.

    The question is best answered by a someone who is up to speed with his financial and taxation position IMO.
    A slightly flippant quip on my part perhaps. However, given that almost every employee entering the workforce now has only the option of an accumulation super scheme and there are also annual caps on contributions (use or lose it), starting earlier rather than later and benefiting from compound savings is probably not an idea to be dismissed as being something for older people. Given the choices of taking the allowance to acquire a new car that may not really be needed for the job or as a personality crutch, converting to cash salary less tax and just spending it or maybe taking advantage of a salary sacrifice situation, a combination of the last two might not be a bad choice.

    The critical question here would be to ask whether there is a definite need to acquire the car to perform the work required of him. If so, then buy the car. If he simply wants the car and can now afford and justify it, buy the car. If not, consider that there might be better outcomes by avoiding something that he just doesn't really need.

    Re the DS3. The extra bits on the Sport improve the appearance, but it has less ground clearance than the Style. The seats in the Sport are more supportive and the leather option feels better than the cloth option. I don't think they've had major problems, but some of the earlier cars may have had some running issues with the EP6 engine, now fixed apparently. Compare the build date on the sticker with the compliance date in case any car you look at has been sitting around a while.
    Last edited by David S; 5th December 2013 at 09:39 PM.

  8. #8
    Fellow Frogger! IE23's Avatar
    Join Date
    Jan 2011
    Location
    Melbourne
    Posts
    749

    Default

    It's possibly an untaxed allowance, which means he will need to spend it to avoid paying tax on it. I recommend some tax agent advice to find out tax implications, fringe benefits tax, if any and best options. A new car will provide a huge depreciation offset claim, where as an old Citroen will provide huge offset expenses claims. All the car expenses can be claimed as an expense to reduce the taxable income. But the catch is you have to keep a logbook and all records. You may know all this already.
    My advice; because he obviously needs a car for his job so buy a near new one with low k's that he likes, it will be reliable, comfortable and safe.


    Adrian

    _________________

    Current;

    Xantia V6 Exclusive Auto 2000


    Past;

    CX25 GTI Turbo series 1 1985
    DS23 IE Pallas 5sp 1974
    CX25ie Pallas Auto 1984 Parts
    2CV 1988
    CX25ie Pallas Auto 1984

  9. #9
    1000+ Posts Kim Luck's Avatar
    Join Date
    Nov 2010
    Location
    Melbourne, Aus.
    Posts
    17,779

    Default

    Any financial planners here? Put your hands up and offer to advise the subject of this thread for a fee, that way the subject can feel they have had substantially correct advice from an industry expert, rather than a bunch of caring, sharing French Car Enthusiasts?
    Don't it always seem to go that you don't know what you've got 'til it's gone............

  10. #10
    Fellow Frogger! tasie C5's Avatar
    Join Date
    Nov 2010
    Location
    St Helens Tasie
    Posts
    598

    Default

    Thanks IE23.
    The reason for asking this advice is I have no experience with these schemes. I assume this allowance is tax free and therefore is a business related expense. This includes fuel and maintenance insurance etc.
    Possibly a purchase of a good second hand car is the best option. However what are the implications when not all the allowance is spent? Who checks the dollars?

  11. #11
    Fellow Frogger! tasie C5's Avatar
    Join Date
    Nov 2010
    Location
    St Helens Tasie
    Posts
    598

    Default

    Are you a financial planner by any chance Kim?

  12. #12
    1000+ Posts Kim Luck's Avatar
    Join Date
    Nov 2010
    Location
    Melbourne, Aus.
    Posts
    17,779

    Default

    Wish I was, C5, but I'd never have taken my own advice! I never took anyone else's either! So, I'm still working and I'm never going to retire and I'm still paying for my own car! Does that help?

    Seriously I think professional advice would help, whether it is taken and used or not!
    Don't it always seem to go that you don't know what you've got 'til it's gone............

  13. #13
    Fellow Frogger! tasie C5's Avatar
    Join Date
    Nov 2010
    Location
    St Helens Tasie
    Posts
    598

    Default

    Thanks KIM. Keep working!
    It is a serious business, retiring. So many of my friends have done this and are no longer here. (in this world that is).

  14. #14
    Too many posts! JohnW's Avatar
    Join Date
    Jul 2001
    Location
    Perth, WA, Australia
    Posts
    10,705

    Default

    Quote Originally Posted by David S View Post
    Best option ... Convert it to super contributions and keep the old car.
    Not that flippant I'd suggest!

    Years ago with a young family and me, being a geologist, away a lot, we were pleased to have a car provided with some degree of salary sacrifice. The benefit was having the car, but in that case I was the main user. It seems to me that this did not make particularly good financial sense, but at the time it suited us well, particularly when we had a new mortgage in Perth (17% folks) and really couldn't afford a new car. So my wife had the new Subaru wagon, which served us well, when I was away and drove the R8 otherwise. Early 1990s.

    At a time of job change, we had a car allowance option but opted to take the full salary and instead borrowed the money to buy a new Peugeot 306. We were new to WA, I was away a lot and didn't want family problems in my absence, so felt for once a new car, owned by us, was sensible. After four years the salary portion that would otherwise have been a car allowance, after tax of course, had paid for the Peugeot. Then we kept the Peugeot and my salary rose by the amount of the loan repayments. We still have the Peugeot (wonderful car) and have not paid for any more new car depreciation since. We bought the Xantia secondhand and it is worth nothing now but has years of life in it. So it has cost $2,000 per year over ten years. The Peugeot has cost about $1500 per year on average to depreciate from $30,000 to very little. So, our "new" cars have each cost $30-40 per week apart from running costs. That is 3-4 Guiness pints, or half this morning's essential taxi ride.

    So my view is to use a car allowance to get a new car if that is what you need. Otherwise take the money and put it somewhere more sensibly. The total cost of our little fleet of old French cars is much less than one new car, and there's no depreciation and not too serious running costs. Cheap thrills.
    JohnW

    Renault 4CV 1951
    Renault R8 1965
    Renault Scenic 2005 (wife's)
    Renault Scenic 2007 (mine)
    Renault Scenic 2006 (daughter's)
    CitroŽn CX Pallas 1980

    National Co-ordinator, Renault 4CV Register of Australia

  15. #15
    Too many posts! JohnW's Avatar
    Join Date
    Jul 2001
    Location
    Perth, WA, Australia
    Posts
    10,705

    Default

    Quote Originally Posted by Kim Luck View Post
    Wish I was, C5, but I'd never have taken my own advice! I never took anyone else's either! So, I'm still working and I'm never going to retire and I'm still paying for my own car! Does that help?

    Seriously I think professional advice would help, whether it is taken and used or not!
    Good idea - getting advice that is. At least make a decision understanding the implications and the other options.
    JohnW

    Renault 4CV 1951
    Renault R8 1965
    Renault Scenic 2005 (wife's)
    Renault Scenic 2007 (mine)
    Renault Scenic 2006 (daughter's)
    CitroŽn CX Pallas 1980

    National Co-ordinator, Renault 4CV Register of Australia

  16. #16
    Fellow Frogger
    Join Date
    Jan 2004
    Location
    Sydney
    Posts
    9,670

    Default

    Quote Originally Posted by JohnW View Post
    Good idea - getting advice that is. At least make a decision understanding the implications and the other options.
    Yes, but one would visit an accountant rather than a planner. Some accountants can offer planning advice (less than before, due to some new rules), but a dedicated planner is often not going to be giving advice on the matter at hand.

    The $12K is possibly the amount the gross salary is reduced to cover a maintained packaged car, factoring in the FBT costs and probably using a novated lease. If that's the case, remember the employee owns the car if the job ends. That's one reason employers often let their employees buy oddball cars. Simply, if they sack the employee, they are not stuck with a car to deal with.

  17. #17
    1000+ Posts Kim Luck's Avatar
    Join Date
    Nov 2010
    Location
    Melbourne, Aus.
    Posts
    17,779

    Default

    Quote Originally Posted by David S View Post
    Yes, but one would visit an accountant rather than a planner. Some accountants can offer planning advice (less than before, due to some new rules), but a dedicated planner is often not going to be giving advice on the matter at hand.

    The $12K is possibly the amount the gross salary is reduced to cover a maintained packaged car, factoring in the FBT costs and probably using a novated lease. If that's the case, remember the employee owns the car if the job ends. That's one reason employers often let their employees buy oddball cars. Simply, if they sack the employee, they are not stuck with a car to deal with.
    Are you an accountant, David?
    Don't it always seem to go that you don't know what you've got 'til it's gone............

  18. #18
    Fellow Frogger
    Join Date
    Jan 2004
    Location
    Sydney
    Posts
    9,670

    Default

    Quote Originally Posted by Kim Luck View Post
    Are you an accountant, David?
    The Lumberjack Song - YouTube
    or
    Monty Python - Lion Tamer - YouTube
    or
    ...?

  19. #19
    1000+ Posts Fordman's Avatar
    Join Date
    May 2004
    Location
    Perth/West Australia
    Posts
    1,371

    Default

    Quote Originally Posted by David S View Post
    The $12K is possibly the amount the gross salary is reduced to cover a maintained packaged car, factoring in the FBT costs and probably using a novated lease. If that's the case, remember the employee owns the car if the job ends. That's one reason employers often let their employees buy oddball cars. Simply, if they sack the employee, they are not stuck with a car to deal with.
    Neither planner nor accountant, but I did spend ten years in the company car leasing/management sector in the 1980's.

    IMO, the above "remember the employee owns the car if the job ends" is the crux of it. Make sure you know what will happen if/when the job ends unexpectedly in say 12 months or 2-3 years time. I can assure you the leasing company will still want it's money, and they may want it immediately if the lessee changes. These company leases are usually written up with a high residual (the amount left to pay at end of lease) to be competitive on monthly repayments. Because the monthly repayments are kept low, if the lease is terminated in a shorter time (eg, 12 months) the car will owe the leasing company more than it is worth. And even if the lease runs full term, the residual will still be quite a large amount (40-50% of original total cost).

    Just make sure the terms/conditions are understood.

    Cheers

    Edit: Free advice (with no responsibilty!) for private leasing: If you haven't got enough money for a deposit, lease a car with 20% residual over say 4 years. The monthly payments will be higher, but the interest is getting paid off quicker, so the market value of the car is more likely to match (or exceed) the remaining payout figure by half way through the lease, and you have 4 years to save up the 20% to pay it off at end of lease. If the leasing company won't accept 20%, find one that will.
    My worth.
    Last edited by Fordman; 6th December 2013 at 02:02 PM.
    2004 Scenic I 2.0 auto (Hers)
    2016 Ford Territory (His)
    2004 WRX (Sunday car)

  20. #20
    1000+ Posts Kim Luck's Avatar
    Join Date
    Nov 2010
    Location
    Melbourne, Aus.
    Posts
    17,779

    Default

    Quote Originally Posted by David S View Post
    You're having me on!
    Don't it always seem to go that you don't know what you've got 'til it's gone............

Thread Information

Users Browsing this Thread

There are currently 1 users browsing this thread. (0 members and 1 guests)

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •