Salary Packaging And Tax Saving

Salary Packaging And Tax Saving

Salary packaging, also known as a salary sacrifice arrangement is a way to restructure your earned income to purchase goods and services or to pay personal expenses and expenses from your income before taxes rather than your after-tax income.

Such a system effectively and Australian Taxation Office (ATO) approved gives more buying power for you when you use taxpayer money that would otherwise be withheld from your salary and paid to the ATO for the government to use.

But the problem is most of the salary packaging devices are ineffective due to the introduction of the Assessment Act Benefits Act 1986 (ABT). This is the most before the tax benefit received by an employee taxable to the employer to the top marginal tax in Australia (currently 46.5%). In reality, this means that it is expensive (plus taxes due) in salary packaging. This is a result that the government of the day, which introduced for the FBT because they wanted to raise taxes.

Therefore, the economies of a packaging arrangement prevailing wage does not occur in the following situations:

FBT does not apply to the front (for example, contributions to pension funds).

The benefit is exempt from FBT (such as magazine subscriptions)

These benefits are not FBT value (for example, the application of the "otherwise deductible")

The benefit has a value at the valuation concessional FBT (eg, the benefits of cars)

So let's see what benefits can be paid to the employee BEFORE tax revenues, which could lead to tax savings in salary packaging. I intend to maintain the benefits under the above classifications.

The benefits are not subject to FBT

Reduced purchase plan for the acquisition of shares authorized for employees

Employer contributions to a fund to accomplish great for the employee

Termination benefits (for example due to a company car or sold to an employee on termination)

The FBT exempt benefits

The most minor benefits valued at less than $ 300, it would be unreasonable to treat the fringe benefits

Some work-related items such as:

hand-held electronic device (ie PC)

POS software

Protective garment

Folder

a medium of exchange.

Benefits that have no value FBT

The benefit, which regulates "otherwise deductible" may be applied.

A good example of this is related to the interests of the employee pays the rent investment property loan. If the employer reimburses the interest charged on the loan from the investment bank, for which interest would be deductible for the employee's FBT value is zero.

Another example is insurance income protection for employees paid by the employer.

The benefits that have a store of value for FBT less strict rules for the evaluation

Way of novation lease of motor vehicles

Street to motor vehicles Associate lease

Benefits of living away from home

Meal entertainment, which has a value of less than 50/50 method.

I hope that the salary packages I listed above to give you an idea of ​​what kind of benefits available, so you can use them for their salary packaging arrangements, if possible.

This article is not intended to enter into the details of every useful element, but will give you the basic concept of wage compression, and show you what the most common benefits that are salary sacrificed.

The calculation and mathematics can be quite complex, but always focused on the tax bracket of the employee is in and the type of service that has a favorable treatment under the laws of FBT.

We recommend that you speak with your accountant salary packaging and FBT issues, because that is what we hare here - and save them as much is the income tax as legally possible.

Tony Marchei Principle is "aXXo Accounting & Management" accounting firm located in the northern suburbs of Perth, Western Australia.

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