For many years in Australia and in many countries it has been possible to use salary sacrifice to buy a car. With the rise of electric bikes as car replacements, tax agencies around the world including the Australian Tax Office now allow you to salary sacrifice an e-bike if its main purpose is for travel to work.
Essentially, salary sacrificing or salary packaging an e-bike means an employee pays for it using pre-tax income. This reduces the cost of purchasing the e-bike because it reduces the employee’s taxable income, and hence income tax, and also avoids paying GST on the e-bike.
The ability to use salary sacrificing to pay for e-bikes is a relatively new thing here in Australia.
On the 14th of October 2015, the Australian Taxation Office (ATO) made a private ruling that allowed an Austalian company called e-stralian to offer electric bikes to be a salary sacrifice item for riding to work. e-stralian is the only provider of this service at present in Australia and so all programs must run through them.
e-stralian provides e-bikes to employees via novated lease. A novated lease is simply a lease that your employer pays for on your behalf out of your pre-tax income. The lease is actually between your employer and e-stralian. To make it hassle free for employers, e-stralian offers a flat fee for service and maintenance but requires that the e-bike be comprehensively insured in case of theft or damage. Comprehensive bicycle insurance with our partner RAC is around $250 a year.
For the employee to end up owning the bike, they need to buy it outright at the end of the lease but if you lease your e-bike for five years the buy-out price becomes $0.
Calculating the cost savings from buying an e-bike using a salary sacrificed novated lease is complicated and will vary from person to person. Nevertheless we can get some idea of what savings are possible using the e-stralian website calculator. The assumptions we made when using the calculator were for an employee who:
Buys a Tiller Rides Roadster - which at the time of writing this post is available at the pre-order special of $3,900.
Earns the average Australian income of $80,000 per year
Travels to a workplace 10 kilometres away four days a week
Does around 30 kilometres of non-work related travel on their e-bike each week.
Takes out a salary sacrificed novated lease for five years - and hence owns the e-bike at the end of the lease.
As you can see from the output from the e-stralian calculator below, the savings to the employee over the five year lease period for a bike of similar value as a Tiller are around $1,300 or around 33% - a significant saving.
In addition to these savings, the five year lease allows the employee to pay for their e-bike bit-by-bit like a payment plan - which is also more attractive to many employees than a single up-front payment.
Salary sacrificing your Roadster
Because you can only pre-order a Tiller Rides Roadster at present, you don’t need to arrange a novated lease or salary sacrifice until the time comes to pay the balance (just before your bike is delivered to you).
If you would like to pay for your Roadster using salary sacrifice all you need to do is put down the pre-order deposit now, and let us know via the comment box on the checkout page (or an email to firstname.lastname@example.org) that you would like to pay the remainder via salary sacrifice.
Informing your employer
With electric bike salary sacrificing being a relatively new thing here in Australia, your employer or salary packaging provider may not be aware that it is possible. If that is the case, pointing them to the e-stralian website is a good first step and could get you on your way to saving more than $1,000 on your new convenient, healthy and environmentally friendly commuter.
By Julian Ilich - Co-Founder of Tiller Rides