Salary Packaging is an important financial planning consideration and wealth creation technique.
Salary Packaging can increase your wealth by structuring your salary or wages to 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 salaries (or wages) in return for the employer providing them with benefits of a similar cost.
Salary packaging is often used by businesses to attract and keep employees. Unfortunately, not all employers provide salary packaging or pass on the full benefit to their employees.
Fringe Benefits Tax
Fringe Benefits Tax (FBT) is a tax levied on employers for providing non-tax deductible benefits to employees or their associates.
Effective salary packaging takes advantage of the FBT general exemptions, calculation methodology, employer exemptions and/or potentially tax arbitrage when there is a mismatch between the FBT tax rate and an individual’s top marginal tax rate.
General exemptions include:
- Superannuation contributions
- Laptops and mobile phones if primarily used for work purposes
- Living away from home allowance
- In house benefits
- The Fringe Benefit on motor vehicles used primarily for private use are calculated using a vehicle statutory method. Every situation needs to be individually considered, and as such we determine whether our clients should salary package their motor vehicles.
- 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.
- Benefits provided by public benevolent institutions (not including public hospitals) or health promotion charities to their employees are exempt from FBT where the total grossed-up value of certain fringe benefits for an 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 an 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 amount of the gross FBT payable (subject to a $30,000 capping).
Notably, meal entertainment fringe benefits provided by employers do not contribute to towards an employee’s cap for the purposes of these exemptions.
Registered RemServ Financial Advisors
Remuneration Services (Qld) Pty Ltd is commonly referred to as RemServ. They specialise in salary packaging.
We are a Brisbane based registered RemServ financial advisor. 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.
Please note we do not usually provide stand-alone salary packaging advice; however we always consider Salary Packaging advice when providing investment, superannuation and/or insurance advice to our clients.
Chris Humphrey Private Wealth Management is conveniently located on the outskirts of Brisbane's CBD.
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