Salary Sacrifice/FBT Ivanhoe
Often you will hear of people having a work phone or a company car, but what does it all mean and how could you benefit too?
Many, but not all, employers will offer their staff the ability to reduce their wage and take part of their income in the form of another benefit.
There is no real limit on what you can package as part of your Salary, but it often come down to what your employer will allow you to do and if there are any tax advantages.
The 5 most common things you could consider salary sacrifice for include:
- Extra Superannuation
- Entertainment and meals
- Computers and laptops
So why would you even consider salary sacrifice? TO SAVE TAX!
How much tax you save depends on 3 things:
- How much you earn
- What expenses you package up
- Who you work for
Let’s look at these reasons a bit further.
1. How much you earn – Being able to get your taxable income down on the face of it sounds like a good thing. But this only really helps if you are able to get a concession or can eliminate having to pay Fringe Benefits Tax. It is this where the distinction between salary Sacrifice and Fringe Benefits Tax makes a difference. You see, the actual Tax in Fringe Benefits Tax is levied at the highest marginal tax rate.
So unless you are on the top tax rate (above $180k) you really don’t want to forgo you lower taxed wages in order to cop FBT at a higher rate.
2. so if you want avoid actually paying FBT, but are still open to the idea of Salary Sacrifice then you need to consider what types of expenses you package up:
- Extra Super is generally taxed at 15%, so you can really save some tax by putting away some extra money for retirement.
- Portable Electronic devices that you can predominately use for work purposes – e.g. laptop, iPad, phone etc. – are exempt from FBT if you can demonstrate their use for work purposes.
- Any other expenses which could ordinarily be used for work purposes e.g. brief case, Qantas Club Membership, Internet, study courses etc.
- Cars have their own special rules, and depending on the type of car, its value, how many km’s you travel each year, how many km’s are for work purposes etc. will determine the wide range of benefits.
These 4 key areas often give employees the most advantages but it really does depend on individual circumstances. Talking to a GNS Accountant will help to maximise your benefits.
3. The final piece of the FBT puzzle is who you work for. Most private companies don’t really want the paperwork headache of allowing their employees to package any expenses. It’s for these reasons that extra Super and cars may be all they are prepared to offer.
But besides private companies, special rules apply if you work for a charity or a public hospital (public benevolent institutions). The Government allows very generous FBT concessions and exemptions to workers in these types of organisations, which can save thousands of dollars in tax each year.
These benefits will often see employees package up rent/mortgage payments, credit cards, private health insurance, private school fees, holidays, meals/restaurants etc.
As you can imagine, being able to get those types of expenses paid before tax is a big advantage and it’s vital that you get professional advice from a GNS Group Accountant to make sure you maximise your FBT Concessions.