Salary Packaging, commonly known as salary sacrifice, is an arrangement between you and your employer where you agree to forego a portion of your income for ‘other’ benefits of the same value offered by your employer. A portion of your pre-tax salary is ‘sacrificed’ in return for payment of employer provided benefits.
Each employer offers a range of benefits that you may salary package.
When you salary package, each payday your employer will send SalaryPackagingPLUS your scheduled benefit amount in pre-tax dollars. Your remaining income is processed as normal through your payroll and will be subject to PAYG tax.
By salary packaging you effectively reduce your taxable income, pay less tax and in many cases have a higher amount of money in your pocket each pay period.
The salary packaging process is simple:
1. Each pay day, a portion of what you earn is deducted and sent to SalaryPackagingPLUS before you pay any tax. This portion remains 100% tax free.
2. SalaryPackagingPLUS will then pay this amount directly to your nominated account completely tax free (conditions apply). It can even be the same account where your pay goes into.
3. The remaining amount of what you earned is then taxed at a reduced amount and paid to you as normal salary.
4. After you combine the salary packaged amount paid to you by SalaryPackagingPLUS together with your remaining after-tax salary, the total amount will be significantly more than when you weren’t salary packaging.
The Australian Taxation Office has given you a capped limit on the amount you can salary package each fringe benefits tax (FBT) year. The FBT year starts on the 1st April and ends on the 31st March each year.
The capped limit for employees that work for a Not-for-Profit Public Hospital is $9,009.95 ($17,000 grossed-up) per FBT year. This works out to be $346.53 per fortnight.
The capped limit for employees that work for a Public Benevolent Institution (PBI) is $15,899.90 ($30,000 grossed-up) per FBT year. This works out to be $611.53 per fortnight.
Yes, you can use the SalaryPackagingPLUS Salary Packaging Card. This is a Visa credit card you can apply for which can be used for general living expenses such as groceries, petrol and other day to day living expenses. For more information about this, you can download the Salary Packaging Card factsheet.
An exempt benefit is an expense that can be salary packaged over and above the capped limit amount.
Exempt benefits are benefits offered by your employer that are non-reportable, not subject to fringe benefits tax and can be salary packaged in addition to your capped limit amount. However, there are limitations that apply to some exempt benefits offered.
Your employer may offer a range of exempt benefits. The most common exempt benefits that are salary packaged are: meal entertainment, holiday accommodation & venue hire, remote area housing, and portable electronic devices (for work related purposes).
SalaryPackagingPLUS recommends no more than 4 changes to your salary packaging arrangement each FBT year. All changes to package arrangements must be in writing using the Salary Packaging Amendment Form.
SalaryPackagingPLUS recommend that employees seek independent professional/financial advice in regard to their financial goals.
Salary packaging will reduce your gross salary and the grossed-up value of the reportable fringe benefits will be shown on your Payment Summary. Your gross salary and grossed-up reportable amounts will be used by the government for income assessments which may affect the following:
Yes, you may commence your salary packaging arrangement at any point throughout the year. You can also maximise your arrangement by salary packaging your annual capped limit within a shorter period of time.
Instead of dividing your annual capped limit over 26 pays, we will divide it over the numbers of pays left between when you start salary packaging and the end of the FBT Year. This allows you to maximise your benefits and your tax savings.
Call SalaryPackagingPLUS directly on free call: 1300 40 80 46 or complete an application form today.
Information and application forms are also available at your organisations payroll office.