Advantage Salary Packaging
In simple terms, Salary packaging is an Australian Tax Office approved way of restructuring your income. By opting for Salary Packaging you can buy goods and services or pay personal expenses and costs from before tax income rather than after tax income – resulting in tax benefits and better income!
Why Salary package?
This is an effective and Australian Taxation Office (ATO) compliant arrangement that gives more buying power to you as you are restoring the tax dollars that would otherwise be withheld from your pay and paid to the ATO for the government.
Salary Packaging Options –
There are a list of items that can be salary sacrificed however as a PAYG contractor the benefits you can claim without generating any tax liabilities for your employer are as follows :
Fringe Benefit Tax – Exemptions pertaining to work related items
A number of benefits are exempt from fringe benefits tax (FBT) under the FBT legislation. Providing certain work-related items to an employee is one of these exemptions. The following work-related items commonly provided in salary sacrifice arrangements are FBT-exempt benefits:
- a portable electronic device (Examples of portable electronic devices include a mobile phone, calculator, personal digital assistant, laptop, portable printer and portable global positioning system (GPS) navigation receiver)
- an item of computer software
- an item of protective clothing
- a briefcase
- a tool of trade.
Superannuation
Making additional contributions towards your Super fund is an effective way of proliferating your take home income. Often termed as Salary Sacrifice, this is a convenient way to boost your savings and enjoy tax benefits. This can be done through your employer by increasing the percentage of super contributions to anything above the statutory limit of 9.5%
These additional contributions also referred to as ‘before tax contributions’ are taxed at a rate of 15 percent by Super Fund companies. This tax rate is reasonably profitable since it is much less than standard tax you would have paid otherwise.
Novated Car lease
A novated lease is a form of salary packaging, where your employer provides you with a benefit other than a cash salary or wages. A three party agreement is made between you, your employer and novated lease company, whereby you enter into a finance lease with novated lease company and a second document called a novation agreement is used to transfer some of the lease obligations to your employer.
This allows your car to be treated like a company car for tax purposes, which can provide you with significant income tax and GST savings. (Ref from NLC)
Living Away From Home Allowance
For FBT purposes, a LAFHA is an allowance paid by an employer to an employee to compensate for additional expenses incurred and any disadvantages suffered because the employee’s duties of employment require them to live away from their normal residence.
The term ‘additional expenses’ does not include expenses the employee would be entitled to claim as an income tax deduction. (ATO)
Interested in salary packaging free of cost? You can get more details on our website www.ipspayroll.com.au where as a contractor you are entitled to free of cost salary packaging services (The services generating tax for employer are excluded)