Salary packaging is a way of paying for some everyday items and living expenses with your pre-tax salary and is currently accepted by the Australian Taxation Office. It is an arrangement between an employer and an employee, where the employee agrees to forgo part of their future entitlement to salary or wages. This is in return for the employer providing them with benefits of a similar value. Salary packaging lowers your taxable income and increases your take-home pay, giving you more money in your pocket to spend on the things you want or even reinvesting those funds into other areas such as Superannuation.
Here’s an example of your salary before and after salary packaging.
Without Salary Packaging
With Salary Packaging
The following work-related items commonly provided in salary sacrifice arrangements are exempt benefits from Fringe Benefits tax (FBT):
- a portable electronic device
- an item of computer software
- an item of protective clothing
- a briefcase
- a tool of trade.
So where do you start? Talk to your employer about whether they offer salary packaging and the possible options available. Once you know where you stand with your employer contact us to see how we can assist you as part of a holistic approach to your financial planning future.