A fleet provider in the UK did a survey among CFOs in fleet companies to find which KPIs the finance department is most worried about. About 53% of them are concerned about reducing costs, and about 40% think improving cash flow is a major concern.
In this article, we want to share how you can improve your business finances by changing your approach to business taxes.
Tax liabilities are one of the largest expenses for a business. Luckily, there are opportunities to lower your tax liabilities. Here are a few ways that you can reduce the tax liability of your company fleet. Better fleet management can help.
Fringe Benefits Tax (FBT)
If you’re letting your employees use your fleet vehicles, you need a system in place to add up the taxable value of car fringe benefits.
There are a few methods of adding up Fringe Benefits Tax (FBT). The more accurate your numbers are, the better.
You can improve your FBT numbers through the use of an electronic log, which makes it easier for companies to track their FBT debts. It also lets your staff do it themselves.
A few of the major benefits of electronic FBT logs include:
- The ATO has approved their use
- They reduce admin time
- They provide better awareness of fleet use and costs
The best part is that the accuracy of electronic logs leads to reduced FBT costs. Usually, overpaying in Fringe Benefits Tax (FBT) is the result of the paperwork. This can be time-consuming and frustrating. But it’s needed to reduce payable benefits. Electronic logs will help in managing FBT costs better.
Goods and Services Tax (GST)
Novated leasing can reduce income and GST tax. Used on behalf of employees, this is also known as a salary sacrifice. It’s a good way to provide benefits for workers without raising salaries.
Through this type of leasing, your employees get a car using their pre-tax income that they can then use for their personal and business work. For better results, you can pair this with FBT logging.
This is used by executives, managers, and employees. This reduces their taxable income, making this an important strategy for the C-suite. It can be part of a complete benefits package.
Whilst this doesn’t reduce taxes for the company directly, it does mean your employees pay less taxes at no cost to you.
This type of leasing significantly saves you time and reduces the amount of tax you need to deal with regularly, especially if you’re managing more than 100 employees.
Novated leasing is a great win for both employers and employees. For you, vehicles remain off the balance sheet and it reduces fleet administration costs. For your staff, it’s a smart way to attract and retain top talent.
Capital Gains Tax (CGT)
Capital gains tax is a large part of a company’s costs. For fleet businesses, a company will deal with many assets.
The more assets a business manages, the more concerned about CGT the company should be.
There are some proven ways to reduce CGT for fleet companies:
- Wait at least a year before selling any assets. If you sell an asset within a year, it’s considered a short-term gain. This is taxed at a higher rate.
- Use capital gains to offset any losses. When losses need to be taken, it may be time to sell fleet assets.
- Leverage FBT to lower your tax costs.
- Sell assets when your income is low. Your capital gains tax rate is controlled by your income tax bracket.
Reducing capital gains tax means being strategic when moving company assets. When company assets are being sold, taxes must be considered.
Set the Wheels in Motion with OptiPay
As a CFO, you know that managing a company fleet takes a lot of work and taxes can be a large part of your expenses.
Managing these expenses often requires a complete tax management and fleet management strategy, but even with the best planning in place, all a business needs is a few customers to pay their invoices late in a month and this will have a ripple effect on a business’ cash flow and its ability to meet any outstanding tax payments, let alone salaries and wages. Finding an ongoing, reliable funding solution that ensures your business always has the cash flow it needs, on time, in order to suit the ongoing payment obligations of your fleet is critical to a successful fleet management strategy.
At OptiPay, we can provide tailored finance solutions in the form of Invoice Finance; Trade Finance and Supply Chain Funding, to optimise the cash flow in the business in order to be able to not only pay your debts as and when they fall due, but to help grow and scale your transport and logistics business. Let us help keep your business moving forward and lay the groundwork for better opportunities.