Salary Packaging

salary-packagingSalary packaging is an Australian Tax Office approved way of restructuring your salary. It allows you to buy a variety of things such as cars, laptops, childcare, etc. out of your pre-tax salary as opposed to your after-tax salary. The benefit of this is that you can purchase these items and be left with more money than you would if you purchased them after tax.

Who is allowed to salary package?

Salary packaging largely depends on your employer and the industry you work in, as your employer has to pay Fringe Benefits Tax on the pre-tax benefits provided to you. Your employer will also determine what they are willing to salary package and this will vary from company to company.

Salary packaging is most effective on mid to high incomes. It is important to remember that salary packaging cannot be done retrospectively. You have to come to an agreement with your employer prior to earning the income.

Charities and not-for-profit hospital employees in these organisations receive a Fringe Benefits Tax exemption up to an allowable limit. This allows these employees to package personal expenses such as mortgage repayments, rent and living expenses from their pre-tax income.

What can be packaged?

Salary packaging benefits can be divided into three separate categories: fringe benefits (cars, school fees, health cover, mortgage repayments); exempt benefits (computers, trade tools and equipment) and your super contributions.

Novated leases

A novated lease is a tax effective way to purchase a motor vehicle. The loan repayments and running costs (petrol, insurance, tyres and maintenance, etc.) can be partially funded from your pre-tax income. The GST on these costs is also generally refundable to the employee. Recent changes to the rules regarding novated leases mean that you are no longer required to drive a set number of kilometres per year.

How can we help you?

If you would like to talk about how salary packaging can benefit you as well as get advice on your salary packaging opportunities, give us a call now.