- May 26, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Confusion Over EV Reimbursement Explanation
I am currently considering purchasing an electric car in the Netherlands. The quote I have received includes an EV ‘reimbursement’ which adds an extra cost of $40.08 to my fortnightly expenses. However, the term ‘reimbursement’ implies that I should be receiving money back, not paying more.
After seeking clarification, I received the following explanation: “When you charge the car at home, you can claim the cost pre-tax at 4.2 cents per kilometer, hence the $40.08 budget. You have the option to opt-out of this reimbursement if you prefer. However, you cannot claim for reimbursement if you do not have a budget allocated for it.”
This has left me feeling even more confused. Does this mean that I am paying $40.08 fortnightly in order to claim the 4.2 cents per kilometer from the ATO during tax season? And would I be unable to claim the 4.2 cents per kilometer if I choose not to pay the $40.08 every two weeks? It seems counterintuitive to pay for charging costs only to receive a tax rebate on them. I feel like I am missing some crucial information and would appreciate a simpler explanation.
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****** just grabbed a
Ask the NL company for an explanation.
And remember … if you can’t make sense of a contract, don’t sign it. Which pretty much applies to all quotes & contracts for NL’s.
They withhold money before it is taxed and paid to you.
Thats the reimbursement.
They hold that money from your pay (pre tax) and it goes into an account that you can claim back from with proof of charging. We didn’t do it, charging was pretty cheap for us and it wasn’t worth it. Also check the proof you need, back when I got my car they rathered having a split meter which is crazy expensive to get installed.
This takes some explanation of basic concepts first.
In NL, you are **changing the order of income taxation and spending**.
There is a bit of calculations involved, which I won’t get into, but the overall outcome is: by changing the order of taxation and spending, **NL effectively give you a “discount / refund” which is equivalent to your marginal tax bracket + 2% Medicare levy**.
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For example, say your tax bracket is 37+2%:
– Paying for an insurance premium worth 1000 dollars and claiming it back under NL, has the same take home impact of paying 610 dollars (you are “refunded” 390 dollars). ** note that I have ignored GST exemption to simplify the maths*
– Paying for 1000 dollars in lease each fortnight will only lead to 610 dollars take home impact (i.e. even though you are being charged 1000 dollars for the lease, using pre-tax money means instead of paying 1000 dollars, it only really costs 610 dollars to your pocket, i.e. the “1000 dollars” price tag is given “310 dollars discount”)
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Now in the context of electricity reimbursement, this gets a bit tricky because your actual charging expense is not the same as how much you can claim, unlike in the case of claiming insurance premium. Your charging expense is dependent on your tariff, how much you charge outside, how much you pay for commercial chargers, etc. Whereas with the simplest claim method, ATO allows you to simply use the odometer and claim 4.2c each km driven as the “estimated electricity expense”.
However, the concept of “refund equivalent to your MTR + 2%” is still identical. If you are getting 40.08 dollars reimbursed, **it is the same effect as ATO refunding you 40.08 x 0.39 = 15.63 dollars**.
Why does it appear that you need to “pay more” in your lease, you may ask? The answer is, this 40.08 dollars is not an “additional payment” – **it is simply a redirection of your salary and advantaging you by skipping the taxation process**. Normally this portion of 40.08 dollars would have formed part of your gross salary, which would have reached your wallet only after having 39% taken out via tax (i.e. 15.63 dollars); however with the reimbursement process, this 40.08 dollars is reaching your bank untouched.
So imagine a portion of your salary which normally would have been 24.45 dollars by the time it reaches your bank, but now instead it is 40.08 dollars reaching your bank due to the magic of avoiding tax by NL reimbursement. That’s what the 40.08 dollars “reimbursement” does, you are not “paying more”, you are “diverting some of your salary away from the tax machinery”. **You are turning 24.45 dollars of your salary into 40.08 dollars.**