What is car allowance?
It’s a sum of money you add to the employee’s annual salary for the purpose of allowing them to buy or lease a vehicle. The staff member will have to source and buy the vehicle by themselves. They’re also responsible for maintaining and insuring the car, as well as monitoring expenses.
How do you salary package a car?
The typical way to salary package a car is by way of a novated lease, which allows an employee to buy a new or used car and have their employer cover the cost of lease repayments. The employer makes repayments to the leasing company out of the employee's pre-tax salary, which reduces the employee's taxable income.
Should you offer employees a company car or a car allowance?
More and more businesses are now offering employees the choice between a car allowance and a company car, whilst many others have moved to only offering car allowances, either with or without provision of a fuel allowance. A car allowance is an amount of money added by an employer to an employee’s salary or wages every month.