How to opt for Effective Salary Packaging techniques
Salary packaging is also termed as Salary sacrificing. Salary packaging is an effective way of lowering taxable income. It is an ATO approved way for enhancing the amount of disposable income. There are two reasons which should compel you to choose Salary Sacrificing option:
- You have to pay less tax
- You can enjoy more money in your pockets by paying expenses
There are different tools which can be exercised for effective Salary packaging through Independent Payroll Services (IPS). They are:
- Novated Car leasing: Packaging a car through Novated leasing option is an effective way of reducing tax by agreeing to forego a part of your salary for maintaining car and some part of the salary can be deducted as pre-tax payment. You should opt for Novated Lease as:
- It is a benefit offered by the employer other than an increase in wages.
- Novated lease agreement is a three party agreement between you, your employer and Novated Lease Company. This allows your car to be treated as a company car which would normally provide income tax and GST savings to you.
- You would have the option of purchasing a new car or an old car, and also you would have the option of selling or leasing back the car.
Exemptions to Fringe Benefit Tax (FBT): FBT is a tax levied on some non-cash elements furnished by the employee during the term of employment. However, IPS provides a list of items which are exempted of FBT and can be salary sacrificed.
- A portable electronic device generally in the form of mobile phones, laptops, PDA etc.
- A computer software item
- A protective clothing item
- Briefcase
- Any approved tool of trade
Super contributions: The mandatory super contribution is 9.5% in the FY 2014-15. However, you can opt to contribute additional super up and above the mandatory contribution. The additional contribution to your chosen Super fund is commonly termed as Salary Sacrifice. The additional super contribution or the sacrificed component of your salary is not assessed and is excluded from tax calculations. So, it does not increase the PAYG tax. Thus, making additional super contribution in an effective tool for increasing savings and lowering the tax.
You can also enrich yourselves to know more about our tools for free salary packaging services by visiting our website www.ipspayroll.com.au (The services generating tax for employer are excluded)