I am currently renting a property and nearly pays $20k per year in a rent. I am wondering if can be taken out from my pre tax income?
What are government rules around it and how much will it affect my family tax benefits?
Rental Property and Fringe Benefit
LSshanaz on 15/11/2013 - 07:40
Comments
Actually, fringe benefits has everything to do with it.
I see now how it could be done, but there is no way it would make sense.
Actually just re-read your comment and you may be saying that you are earning $29K from rent rather than paying (language used is vague at best). In that case:
I am wondering if can be taken out from my pre tax income?
No.
What are government rules around it and how much will it affect my family tax benefits?
Same as all taxable income.
PS: I am not an accountant or expert. Speak to Centrelink or an accountant.
PPS: Fringe Benifits doesn't have anything to do with this.
If you're renting you can't take deduct it. How would it be directly related to any income you're producing?
As Bruce said - if you're struggling go for Rental Assistance.
How would it be directly related to any income you're producing?
You can do FBT (from memory), IF you moved your entire family due to taking a job/position somewhere not close to where you were living before.
Disclaimer here: blah blah blah not an accountant or a financial planner, go see one.You're referring to the living away from home allowance (LAFHA) which is FBT exempt in certain circumstances. Got to be careful with this one, the circumstances are pretty limited.
Yes, your employer can pay any personal expense (including rent) on an employees behalf from pre-tax income. This however creates a fringe benefit for the employee equal to the amount of the payments, and the employer will have to pay fringe benefit tax of 46.5% on this benefit. Clearly, few employers would agree to this, as they are not going to pay extra tax themselves to save you money.
Generally there is no benefit to creating a fringe benefit where the benefit is 100% private use (for example home rental). Fringe benefits is usually reserved for things that are business related, such as motor vehicles etc, or FBT exempt items, like laptops.
In my experience, the employer passes the tax through to the employee. I currently lease a car through my employer and pay the lease payments, cost of running the car and FBT out of my pre tax salary package. While 'legally' it is a tax on employers, they would usually 'legally' pass it onto the employees.
Car's are a bit different largely due to the statutory formula method. As a general rule (I mean very general) the best way to sal salc a car is to apply the statutory formula which assumes that 20% of the taxable value of the car is your fringe benefit (the remaining portion is assumed to be work related and therefore FBT exempt), then you pay that 20% amount back to your employer as an "employee contribution" which results in no fringe benefit and subsequently no fringe benefits tax.
Because you are paying your employer an "employee contribution" it feels like FBT is being passed onto you but it isn't, it is done to reduce the deemed fringe benefit (under the statutory formula) you are receiving to nil so there is no FBT.
It seems like a pretty good deal because essentially you're getting a car & its expenses paid for pre-tax even though you're still paying for them through "employee contributions". But there's a catch…
The real traps with salary sacrificing cars are the "admin fees" you get charged for maintaining this arrangement and the finance costs (higher % than normal in some cases) because generally you can't arrange you're own finance for sal sac cars.
Technically, you could salary package your rent so it would be taken out of your pretax income however your employer would be liable to pay fringe benefits tax which far exceeds any benefit to you so it is very unlikely your employer would package it for you (unless you work in government where they have certain FBT concessions).
It would affect family tax benefit payments as fringe benefits are included in your adjusted taxable income which determines how much they pay you.
Just to add to that, non-for-profits and charities are exempt for half of liable FBT I believe
Many non-profits (schools, hospitals, charities, etc.) don't pay tax, and are not liable for FBT.
They routinely package all sorts of staff expenses out of pre-tax income, like car payments, school fees, entertainment expenses etc.
If your employer doesn't pay FBT they may be open to discussing this, but if they do it isn't beneficial.I used to salary package my rent. Could do it upto $9000 odd. Only thing was that my employer (a hospital) kept half of the 'profit'!
I love it when people ask really complex financial/legal questions on public forums without providing any circumstances at all, and then never come back or comment again.
Spot on! The OP's question was poorly-worded and pretty lame in the first instance anyway.
No.
It doesn't.
If you are eligible for rent assistance (http://www.humanservices.gov.au/customer/services/centrelink…) this will affect it.
PS: I am not an accountant or expert. Speak to Centrelink.
PPS: Fringe Benifits doesn't have anything to do with this.