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, it is Maxxia’s responsibility to ensure that an annual amount of post-tax, equivalent to the taxable value of your vehicle is deducted from your pay, this is known as the Employee Contribution 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.

Some customers, especially those recently entering into a novated lease, may need to readjust their post-tax contributions to meet ATO requirements.

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
• Maintenance
• Running costs
• Fuel
• Claims for any eligible expenses such as registration and insurances

In some cases Maxxia can either collect too much post-tax (ECM excess) or not enough, which is called a shortfall. 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.

There are a number of options available to you should we contact you regarding a shortfall:

1. You may choose to make additional post-tax contributions for the remaining pays in the FBT year to offset your shortfall.

2. You can choose to pay the remaining post-tax amount directly to Maxxia. 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.

3. 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.

4. 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.

If we do not rectify the shortfall of ECM, your employer has to pay the FBT owing to the ATO, as the amount is now an FBT liability and must 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.

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:

1. Depending on your account balance. We may be able to use some of the funds in your vehicle account with Maxxia.

2. Depending on your employer’s requirements, you may be able to pay the liability over a number of pay cycles with pre-tax dollars.

3. You can pay the FBT liability directly to Maxxia using post-tax funds, who will then send this to your employer on your behalf.

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 31 March) 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 1 April.