Salary packaging
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 remodelling your salary package, you 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.
Reducing your take-home pay could also bring you under thresholds such as the Medicare Surcharge levy, resulting in greater potential tax savings.
What sort of things can I package and what are the tax implications?
The benefits you can package as part of your salary vary depending on your field of employment and the company for which you work.
Taxable benefits
Some benefits can attract fringe benefit tax (FBT), which is usually levied at the top marginal tax rate of 46.5 per cent:
- property:
- real property such as land and buildings
- shares
- bonds
- expense payments:
- loan repayments
- school fees
- child care costs
- home phone costs
- cars.
Your employer is liable to pay the tax but your take-home pay may be reduced by the same amount.
It pays to check the details before entering into any salary packaging arrangement.
Tax-exempt benefits
Other benefits are exempt from FBT, including:
- a portable electronic device
- an item of computer software
- an item of protective clothing
- a briefcase
- a tool of trade.
- work-related healthcare
- accommodation and meals during work journeys
- work-related relocation costs
- membership fees
- journal subscriptions
- car parking on employer’s premises.
The ATO applies a strict work-related test and you are limited to one FBT-exempt item per year unless it is a replacement.
Sacrificing part of your salary to superannuation is also a potentially effective way of minimising tax.
Go to AXA's adviser website:
Login to your employer super online account:
As at 30th March 2011, AXA Asia Pacific Holdings Limited and all of its Australian and New Zealand subsidiaries ceased to be members of the Global AXA Group and became members of the AMP Group.
