1. PREPARED BY: ADAM MILLS AUGUST 2014 Vehicle Leasing

2. Current Lease Rates

3. Lease Rates Increased By 10%

4. Running Costs Running Costs are made up of several components but can be simplified into two main parts; Fixed costs and Variable costs

5. What Makes Up Fixed Costs? Fixed costs are those that Council will need to pay regardless of the vehicles utilisation. They are: Fringe Benefits tax (20%) Registration Compulsory third party insurance Comprehensive insurance NRMA roadside assistance Depreciation

6. What Are The Variable Costs Variable costs are those costs which are affected by usage. These are:  Fuel  Maintenance

7. Councils Averages The figures below demonstrate Councils leased fleet average, taken from real data;  Fuel consumption, 10L/100klms  Maintenance (including tyres) $0.06 per kilometre  Average fuel price $1.50  53% private usage  Depreciation $4211 per annum  3441 litres of fuel per annum

8. Now The Calculation………. As we can see from the above table Councils average costs is $219.95 per leased vehicle per week. When we split the figure up based on the average percentage of private use we can see the private use component of that figure is $109.97 per week, Councils cost is $103.37.

9. FBT There are 3 forms of car fringe benefits. They are:  Statutory  Operational  Residual Each of these is calculated differently. When calculating fringe benefits tax, the fleet department compares the first two methods and chooses the cheapest of the two.

10. Statutory Method The statutory method is a simple calculation of 20% of the capital cost of the vehicle. A = Statutory percentage B = Base value of the vehicle Example: S * B = FBT FBT = 20% * $27,500 = $5,500 FBT Lease Rate = $105.77

11. Operating Cost Method The operating cost method is a slightly more difficult calculation. C= Operating cost of the vehicle during the FBT year BP= Business use percentage R= Payments made by the employee during the FBT year Example: (C*(100%-BP)) – R $11,437 * 53% = $6,061.61 FBT Lease Rate = $116.57

12. Residual Method The residual method is the most expensive method of fringe benefits tax calculation and is applied where a commercial vehicle is supplied for private usage. The calculation is a based on cents per kilometre basis. Example: Private kilometres * $0.55 = FBT - 34,412klms * 53% = 18,238klms - 18,238 * $0.55 = $10,030.90 FBT Lease Rate = $192.90

13. What This All Means If the employee contributes the full FBT amount in lease rates Council retains that money which can then be used to offset the running expenses of the car. Example: Running costs – Employee Contribution = Cost to Council $11,437.22 - $6,000 = $5,437.22 Weekly Cost = $5,437.22 / 52 = $104.56