Future Proof Financial Planning, Financial planners, Lismore provided salary packaging advice.
What is salary packaging?
Salary packaging – also known as salary sacrificing or flexible remuneration planning – allows you to structure your existing salary into a combination of take-home pay and a mix of approved benefit items. Your employer still pays you the same amount, but by remodeling your salary package, you may gain greater benefits from your salary.
For example, your salary package could include a car lease. Your employer would pay the lease on your behalf using your pre-tax salary. However, as you are now receiving less cash, you pay less income tax.
To be effective the salary packaging agreement has to be made before the employee has earned the entitlement to the salary or wages. That is, it must relate to future earnings and should only be put in place after receiving advice from a qualified professional adviser.
What sort of things can I package and what are the tax implications?
The tax and other implications of including benefit items in a salary package have to be carefully considered and the benefits you can package as part of your salary vary depending on your field of employment and the employer you work for. Your employer is liable to pay the fringe benefits tax (FBT) which is levied at the top marginal tax rate of 46.5% but your take-home pay may be reduced by the same amount. The most common benefits are car and car parking though your employer can select different methods to calculate FBT. Therefore, it pays to check the details before entering into any salary packaging arrangement.
Work related items eg a portable electronic device, computer software, protective clothing, a briefcase and a tool of trade which are primarily used for work purposes are exempt from FBT. The exemption is restricted to one item per year per item that has a substantially identical function. If some of these items are already provided by your employer, your employer may not allow you to salary package these items. Again, you should check with your employer.
Future Proof Financial Planning provides salary packaging advice in Lismore. Contact us on ph 1300 377 888 or 02 66227333.
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