Salary packaging can benefit both the employer and employee,some of the advantages are:It offers the employee choice to choose how they receive their income.Integrates personal and financial planning; for example many financial advisers recommend salary sacrificing into superannuation as a way to reduce your tax while increasing your retirement income.Employees get a pay rise with no cost to the employer. …More items
What is salary packaging?
Salary packaging, also known as salary sacrificing, is an arrangement with your employer where certain items or benefits can be paid for out of your pre-tax salary. This reduces your taxable income and therefore reduces your income tax payable.
What benefits can I include in my salary package?
There’s also lots of other benefits you can include in your salary packaging arrangement. When you salary package for an entire Fringe Benefits Tax (FBT) year (1 April to 31 March) the maximum you can salary package is either $611.54 per fortnight or $305.77 per week.
Should you enable staff salary packaging?
Overall, it is a very good idea to enable staff salary packaging options. The ability to shift purchasing costs to the employee, while ensuring that both sides benefit from a costing point of view, makes this one of the best benefits that you could offer your staff.
How does a salary package affect my taxes?
When you salary package, you pay for some living expenses with your pre-tax salary. So you’d still be paying for your usual expenses, but because you’re using pre-tax dollars you could be reducing your taxable income at the same time. At each pay cycle you could have more money to spend on the things you want.
How much tax is paid on salary sacrificed super?
Salary sacrificing into super can be a tax-effective way of boosting your super balance and increasing your retirement income. Even though salary sacrificed super contributions are taxed by the fund at 15% when they are received, that’s probably much lower than your marginal tax rate. Most ADF members will have a marginal tax rate of at least 32.5%, possibly higher, so salary sacrificing into super could equate to a significant tax saving. Investment returns in the fund are also taxed at a maximum of 15%, and may be lower depending on your investment option.
Why do employers require after tax contributions?
An employer may require an employee to make an after tax contribution to reduce or eliminate the employer’s FBT liability. For example, Defence members that salary package a motor vehicle will be required to make an after tax employee contribution, in addition to the salary sacrificed amount so that no FBT will be payable by Defence.
What is fringe benefit?
A fringe benefit is a non-cash benefit you receive from your employer, instead of salary, on which your employer is liable to pay fringe benefits tax (FBT). Common types of fringe benefits include:
What is salary packaging?
Let’s start with how it works. Salary packaging, also known as salary sacrificing, is an arrangement with your employer where certain items or benefits can be paid for out of your pre-tax salary. This reduces your taxable income and therefore reduces your income tax payable. The types of things you can salary package will usually fall into one …
What is the tax rate for ADF?
Most ADF members will have a marginal tax rate of at least 32.5%, possibly higher, so salary sacrificing into super could equate to a significant tax saving. Investment returns in the fund are also taxed at a maximum of 15%, and may be lower depending on your investment option.
What are the different types of salary packages?
The types of things you can salary package will usually fall into one of three categories: fringe benefits, exempt benefits, and super.
What are exempt benefits?
Exempt benefits are limited to items that are work-related and you can usually only purchase one item each FBT year if items have substantially the same function, for example, a laptop and a tablet. Exempt benefits include: Portable electronic devices. Computer software. Protective clothing.
What are the Disadvantages of Salary Packaging?
Note, this list is longer than the advantages! Be careful if you decide to salary package as there are lots of pitfalls to watch out for!
Why do financial advisers recommend salary sacrifice?
Integrates personal and financial planning; for example many financial advisers recommend salary sacrificing into superannuation as a way to reduce your tax while increasing your retirement income.
How do employers compete for the best staff?
Employers are able to compete for the best staff by offering flexible remuneration via salary packaging.
How long do you have to leave a job to get a package?
have no less than 6 months to the end of their contract at the time of entering into salary packaging.
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Applied Education makes no representation or warranty with respect to the contents hereof and specifically disclaims any implied warranties of fitness or any particular purpose. Applied Education disclaims any liability for any direct, indirect, incidental, consequential, special, or exemplary damages resulting from the use of the information in this document or from the use of any products described in this document. Mention of the product does not constitute an endorsement of that product by Applied Education. Data used in examples and sample data files are intended to be fictional. Any resemblance to real persons or companies is entirely coincidental.
Is salary packaging voluntary?
Salary packaging is voluntary and most companies have eligibility criteria for packaging such as:
What are the benefits of remote working?
Employees that work remotely may qualify to salary sacrifice everything from their mortgage interest or rental accommodation costs, to the cost of airfares to fly in for meetings with head office.
Why is salary packaging important?
February 6th, 2017. We all know that salary packaging is popular with employees, as it allows them to reduce the amount of tax that they pay. It allows the employee to pay for expenses, such as a car, laptop, or additional superannuation expenses from their pre-tax earnings, which in turn reduces the total income that can then be taxed.
Why do employers pay for laptops?
Employers are generally happy to agree to this, as it saves the onus on providing equipment from being on them.
Why is equipment so expensive?
This is particularly the case with cars, where there is a lot of risk that a business is responsible for, in terms of insurance and so on. By enabling employees to buy their own equipment via salary packaging and then use it for work purposes, the business is able to mitigate a lot of that expense and risk.
What are the benefits of salary sacrifice?
One of the most basic benefits of all for employers is that, in offering salary sacrifice options , employees will see their place of employment as desirable.
Why do companies sacrifice rent?
The ability to salary sacrifice rent or flights when working remotely means that a business can more easily recruit talent from around the country, which can be a great help in finding specialised skills and professionals without needing to ask them to relocate from their homes.
What happens if you take maternity leave?
For example, if an employee were to get seriously sick or take maternity leave, any equipment being paid for over a period of time (for example, cars), would continue to incur the same costs. The employee’s wages would decrease in line with the type of leave being taken, but they would not lose access to the equipment, which can become expensive for the business.
What is an accesspay card?
The AccessPay Salary Packaging and Meal Entertainment Card is a prepaid, reloadable Mastercard issued by EML Payment Solutions Limited ABN 30 131 436 532 AFSL 404131. Please consider if this product is right for you. Read the PDS for more information. The Target Market Determination for this product can be found here.
What is salary packaging?
Salary packaging is an easy and convenient way to pay for regular expenses such as your mortgage or rent, credit card and personal loan payments, or even regular daily items such as groceries and petrol. There’s also lots of other benefits you can include in your salary packaging arrangement.
What is the maximum salary package allowed for fringe benefits?
The maximum for employees of not-for-profit organisations is $15,900 (this is also known as your ‘tax free cap’) and $9,010 for hospital and healthcare employees. Salary packaging to the ‘cap’ means you’re using the maximum amount you’re allowed to salary package.
How much can you package for fringe benefits?
When you salary package for an entire Fringe Benefits Tax (FBT) year (1 April to 31 March) the maximum you can salary package is either $611.54 per fortnight or $305.77 per week. Salary packaging this amount means you are making the most of your benefit, but you can choose to salary package a lower amount if you prefer.
Why do you need to use salary packaging?
Salary packaging is the easy way to give yourself a pay rise. If you work for an organisation that offers salary packaging, you can use some of your salary to pay for everyday expenses before income tax is calculated , meaning you pay less tax and have more money to spend. That’s because your salary packaging money is deducted first …
How much can you package your salary?
Due to the Government’s existing tax-free threshold, salary packaging won’t be beneficial to you if you earn less than $18,200. However, if your annual salary is more than the threshold amount and you pay tax, you should be able to benefit from choosing a salary packaging solution.
How much is the FBT rebate for 2019?
For the 2019 FBT year you will receive a rebate of 47% of the gross FBT payable (up to $ 30,000). This effectively means you will pay 53% of the gross FBT up to $30,000 and the full amount for anything over this.
Reward & Retain
If you offer salary packaging or novated leasing options to your current employees, you’ll inspire confidence and increase loyalty. Your team members will feel rewarded for all the hard work they do with visible financial advantages, such as being able to afford that brand new car.
Save Serious Dollars
It may surprise you to know that using a salary packaging provider won’t require any additional investment by your company. Salary packaging providers receive payment through minor administrative fees that form part of your employee’s pre-tax deductions. Given what your employees save, these fees are negligible.
Claim Tax on Leased Vehicles
Even though your friendly provider will handle all the paperwork, novated lease cars are leased through your company. This means you can claim on the lease and the running costs of the car for a healthier, happier tax outcome at the end of the financial year.
Entice New Recruits
On the hunt for new employees during a personnel shortage? Salary packaging is the perfect way to entice fresh faces without putting your hand in your own pocket. The many benefits of salary packaging can be leveraged to tempt the best talent to your company.
Can an Employee Willingly Participate in Salary Packaging?
Yes, as an employee you can salary package if your employer is willing to offer you certain benefits. Most of the employers tend to offer salary packaging into super categories; however, it may restrict who can package other benefits. Hence you must always ask your employer right at the beginning what benefits does it offer. The concept of salary packaging is more effective for employees who are in the range of middle to high income groups.
How much is super fund taxed?
These salary contributions are taxed by the super fund at 15%, which is the same as your employer’s contributions. For a lot of people, this is usually lower than their marginal tax rate. Your employer is exempted from paying fringe benefits tax on super.
What are exempt benefits?
Your employer is exempted from paying fringe benefits tax on these benefits. Exempt benefits include the following: computer software, protective clothing, portable electronic devices, briefcases, and tools of the trade.
What is salary packaging?
Salary packaging or salary sacrifice is a mutual arrangement between you and your employer, where it is pre-decided that you will pay for some services or items directly from your pre-tax salary. For instance, you may salary package cars, computers, super funds, and child care, etc.
Can you use salary packaging retrospectively?
They are used to assess your tax offsets, Medicare levy surcharge, child support payments, and other government benefits. Salary packaging cannot be retrospective. You need to enter into the salary packaging arrangement with your employer prior to earning the said income.
Do non profit organizations pay FBT?
Special Rules for Non-Profit Organisations. Most employers need to pay FBT on the value of benefits they offer to every employee. However, non-profit organisations are exempted from fringe benefits tax up to a certain extent, depending on the type of organisation .
Can non-profits provide cash benefits?
Hence these organisations can provide non -cash benefits to their employees more cost effectively as compared to other companies. Non-profit organisations can also provide cash benefits such as loan repayments and entertainment from pre-tax income, which makes salary packaging attractive to their employees.
Can a Not for Profit Employee Salary Package Mortgage or Rent?
NFP staff may also benefit from salary sacrificing mortgage or rent payments tax-free.
What is salary packaging?
Salary packaging for not for profit employees is one of the biggest benefits that come with the job. It’s an agreement between you and your employer which allows you to increase your income by paying for certain expenses using pre-tax dollars. Not for Profit employees are eligible for higher-level discounts and cost exemptions …
What are the benefits of novated leasing?
The benefits are significant, including savings in tax, vehicle running costs, GST and its purchase price. Another advantage of novated leasing is you’ll have access to a fuel card to help organise all car-related expenses.
How many not for profit organisations are there in Australia?
Australia has about 600,000 not for profit organisations. That’s a lot of charities playing a critical part in the country’s economy. Salary packaging concessions help NFP staff to access a take-home pay that’s more competitive to the private sector.
What expenses can be paid for from pre-tax dollars?
Other regular fixed amount expenses, such as school fees and loan payments may also be paid for from your pre-tax dollars as part of a salary packaging arrangement. Other expenses that can be salary packaged include: Regular claimed expenses such as credit card payments.
How much can you package for NFP?
NFP employees can package up to $15,900 every year, which is the maximum capped amount. Salary packaging is an option. For those that do use it, you will only pay tax on the remaining portion of your salary, significantly reducing your taxable income.
What is a car package?
Car packages, also known as a novated lease, can be the most cost-effective way to purchase and run a vehicle. In comparison to buying a car outright, novated leasing consolidates all your car essentials into the one payment, which is taken from your pre-tax earnings.
Is Salary Sacrificing Worth It?
Salary sacrificing may sound like a scary term, but the long-term benefits can be very worthwhile. When you choose to salary sacrifice, you only have to pay 15% tax on that portion of your income, instead of the usual tax rate. It also can reduce the threshold on the portion that you are taking home
What Are Some of The Pros of Salary Packaging?
Some of the financial benefits for middle to upper income earners are clear, but there are some other added pros of arranging a salary package deal with your employer and it is important to speak with a detailed, reputable taxation specialist, such as LeVeon to find out what is best for you.
How to contact Leveon tax?
To gain certainty around your future, don’t hesitate to call LeVeon on 0488 008 259 or email [email protected] to arrange an appointment so that we can help you reach your personal and financial goals.
How much can you contribute to fringe benefits?
There are also limits to follow. The contributions’ cap means that you can up to $25,000 per annum following the Fringe Benefits Tax year, which runs from 1st April to 31st of March. Especially since this doesn’t align with the tax year of July-June, you need to track your contributions carefully.
What are the services that can be included in a package?
Access to services – arrangements can be made for packages to include access to things like childcare, gym memberships and healthcare.
Is superannuation a savings account?
Locked up finances – superannuation is not a savings account. There are very few circumstances that an individual can access the funds prior to retirement.
Is life insurance included in superannuation?
Reduced insurance costs – life insurance is usually included in superannuation accounts. The premiums may be tax-deductible as well.