Salary Packaging

Salary Packaging is a wealth creation technique and an important financial planning consideration.

Salary Packaging can increase your wealth by restructuring your salary or wages to either increase your take home pay or superannuation benefits.

It is an arrangement between an employer and an employee, whereby the employee agrees to forgo part of their future entitlement to salary (or wage) in return for the employer providing them with benefits of a similar cost.

Salary packaging is often used by business to attract and keep employees. Unfortunately not all employers allow for salary packaging and not all pass the full benefit to the employee.

Fringe Benefits Tax

Effective salary packaging takes advantage of the Fringe Benefits Tax (FBT) general exemptions, calculations, and/or employer exemptions. FBT is a tax levied on employers for providing non-tax deductible benefits to employees or their associates.

General exemptions

• Superannuation contributions.
• Laptops and mobile phones if primarily used for work purposes.
• Sacrificing salary into superannuation fund.
• Living away from home allowance.
• In house benefits.

Calculations

• Motor vehicles: every situation needs to be individually considered but as a rule of thumb the motor vehicle statutory method (which is used for motor vehicles used primarily for private use) encourages motor vehicles driven in excess of 15,000 klms per year or that cost less than $10,000 to be salary packaged .
• FBT is calculated using the top marginal tax rate. Fringe Benefits can be reduced by employee contributions, so if an employee is not on the top marginal tax rate they should make employee contributions to offset any Fringe Benefits and eliminate any FBT.

Employer exemptions

• Benefits provided by public benevolent institutions (not including public hospitals) or health promotion charities to its employees are exempt from FBT where the total grossed-up value of certain fringe benefits for each employee during the FBT year is $30,000 or less.
• Benefits provided by public and non-profit hospitals and public ambulance services are exempt from FBT if the total grossed-up taxable value of certain fringe benefits provided to each employee is $17,000 or less.
• Qualifying employers including charitable institutions, religious institutions, trade unions and public education institutions are entitled to have their liability reduced by a rebate equal to 48% of the gross FBT payable (subject to a $30,000 capping).

Additionally meal entertainment fringe benefits provided by employers with the above exemptions do not contribute to towards an employee’s cap.

Registered RemServ Financial Advisors

Remuneration Services (Qld) Pty Ltd is commonly referred to as RemServ. They specialise in salary packaging.

We are registered RemServ financial advisors in Brisbane. RemServ manages the salary packaging arrangements for over 95,000 employees, services around 150 employer clients and is headquartered in Brisbane. The majority of RemServ’s employers have exempt classifications.