A client asked me about salary sacrificing his car.
He had just started a new job with the State Government and salary sacrificing is available – Ie, looking to pay for his car from pre tax dollars.
He made the statement “I think this is a good thing to do.” Then asked “What do you reckon?”
Always, my first question back is “What is wrong with your car now?”
He replied, “Nothing really. It is just that this benefit is now available”
Aside from the tax arbitrage advantages (no one wants to pay any more tax then they have to after all!) the impact of a $40,000 car purchase on his salary around about $400 per fortnight.
An additional expense he doesn’t have right now.
So yes, while it might be tax effective by putting it through a salary package, we have to call it for what it is – an unnecessary additional expense.
The question should be not “Do I salary sacrifice?”.
Instead, the question should be “Do I need the car in the first place?”
If the answer to the car question is “Yes”, then the next question should be “What level of car do I need and how do I maximise the cost of it in my package?”
Keep in mind the difference between a $40,000 and a $30,000 car roughly speaking is an additional $150 per fortnight.
Don’t get me wrong, I love my car and driving mine gives me great pleasure.
I challenge you to just ask the bigger picture questions. Don’t make assumptions that just because something is available, it is the right thing to do.
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