Salary packaging or salary sacrifice as it is often called, is an Australian Taxation Office approved way of restructuring your income from employment. It enables you to buy a range of items out of your before tax salary rather than your after tax salary to leave more money for your lifestyle costs.
We work with clients from various industry, government, health care, emergency services and not for profit sectors to establish appropriate salary sacrifice strategies to enhance your overall cash flow and wealth position.
What can be packaged?
If you work for a Public Benevolent Institution or fringe benefits tax exempt employer almost any item can be packaged without personal fringe benefits tax being applied up to a limit each year. We are on the list of preferred advisers for the ACT Government.
Public and non-profit hospitals and ambulance services (including supporting services) have a capping threshold placed on benefits that are exempt from FBT. The threshold is $17,000 grossed-up taxable value per employee which equates to a cash value of $9095 each FBT year.
For Health Promotion Charities and PBIs, a capping threshold of $30,000 grossed-up taxable value per employee is applicable,
with a cash value of $16,050 each FBT year.
If you work for any other employer or agency generally you can package the following items:
Superannuation contributions – these are fringe benefits tax free however the contribution limits apply depending on your age.
Car – this is a concessionally fringe benefits taxed item depending on the number of kilometers you drive each year. When you package a vehicle this is a three way agreement between you (the employee), your employer and the financier. The finance option is generally a novated lease agreement which allows you to have private use of a new or used car (up to 8 years old at the end of the lease period). Use of the ‘employee contribution method‘ can assist in reducing the taxable value of the car and therefore reduce the fringe benefits tax payable.
Laptop – if you use a laptop for work you (51% or more in your employment) you are able to package this as a benefit. You are able to package one laptop per FBT year which runs 1 April to 31 March each year. You can not claim external modems, printers or other accessories and you can not claim software unless it is specifically for employment purposes.
Other Items Ordinarily Tax Deductible – You are also able to bring forward any tax deductions by packaging expenses that would normally be deductible in the financial year. This can include airline lounge memberships, income protection insurance, self education, mobile phone, professional membership fees and subscriptions, briefcases, etc.
Generally your employer will require you to seek professional advice to ensure you understand the advantages and any disadvantages or changes to your take home salary cased by implementing the strategy, including the effect on any family tax benefits or other Government entitlements.
At moneymechanics. we can assist in showing you the before and after tax and cash flow consequences of implementing such a strategy.