What is Salary Packaging?
“Salary packaging” or “salary sacrificing” involves an arrangement between an Employer and an Employee whereby the employee contractually agrees to forego (sacrifice) part of their future entitlements to salary, in return for the Employer providing certain non-cash benefits.
Benefits received in lieu of cash salary are not assessable under the PAYG system and are taxed in accordance with the Fringe Benefits Tax (FBT) Act.
Salary packaging is a great way for organisations to add greater value for employees. Not only does it give employees the flexibility to decide how they wish to be remunerated, but it also increases the value of their remuneration…without increasing the cost to the Employer.
What can you salary package?
A number of benefits are either exempt from FBT or are treated concessionally for FBT purposes and may provide the employee with a tax advantage by taking the benefit rather than salary. The level of benefit is dependent upon the employee’s marginal tax rate.
Benefits can be separated into four distinct categories:
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- New and used cars (via Novated Lease)
- Motorcyles
- Scooters
- iPad or similar tablet device (work related)
- Mobile phones (work related)
- In-house benefits (eg. childcare or gym facilities)
- Superannuation
- Salary Packaging Fees
- Self Education costs
- Tools of trade
- Computer software
- Income Protection Insurance
- Professional publication subscriptions
- Investment Property expenses (eg. interest)
- Professional association fees
- Workplace giving
- School Fees
- Private Health Insurance
- Utility Bills
- Mobile phone bill
- Mortgage repayments
- Rent
- Personal Loan repayments
- Credit card repayments
- Meal Entertainment
Can I salary package any of the items shown above?
The items you can package will largely depend on the type of organisation you work for:
| Expense Item | Commercial Business | Public Hospital | Public Benevolent Institution | Rebatable Organisation |
|---|---|---|---|---|
| Motor vehicle lease repayments and running costs | Yes | Yes | Yes | Yes |
| Laptop/iPad or similar portable electronic device | Yes | Yes | Yes | Yes |
| Superannuation | Yes | Yes | Yes | Yes |
| In-House Benefits | Yes | Yes | Yes | Yes |
| Otherwise Deductible Items | Yes | Yes | Yes | Yes |
| Mortgage Repayments | No | Yes | Yes | Yes |
| Personal Loan repayments | No | Yes | Yes | Yes |
| Personal Credit Card Repayments | No | Yes | Yes | Yes |
| Utility Bills | No | Yes | Yes | Yes |
| Meal Entertainment | No | Yes | Yes | Yes |
| Accommodation & travel | No | Yes | Yes | Yes |
| House rent | No | Yes | Yes | Yes |