Help me understand salary sacrifice

• 

  trex on 04/02/2021 - 15:06

  +5

  I am currently working as an IT contractor with the net income $1000/week but no sick leave/annual leave. I got offer for perminant fulltime IT helpdesk Level 1/2 support at one of the public hospital in melbourne and they are offering 65k (include salary packaging so i get tax for less then 55k/year) + super + RDO.

  Grab it quickly!

• 

  Almost Banned on 04/02/2021 - 15:15

  There are definite advantages to working for government - salary packaging being only one.
  What matters most to you?

  • 

    georgelu479 on 04/02/2021 - 15:26

    i think RDO/sick leave, annual leave is more matter now. i will need to take maternity leave soon around september which if i stay at my current role, i wont be able to get it as a contractor

    • 

      Almost Banned on 04/02/2021 - 15:29

      I think that answers your question doesn't it.
      If you are looking like needing leave anytime soon, then the hospital job seems like a good option.

    • 

      aragornelessar on 04/02/2021 - 16:01

      +8

      You should also check the parental leave requirements for the position - ensure you don't need to be there a certain amount of time before you can take it paid/unpaid.

      Eg, Fairwork says this
      Which employees are eligible for unpaid parental leave?
      All employees in Australia are eligible for unpaid parental leave if they have completed at least 12 months of continuous service with their employer.

      https://www.fairwork.gov.au/how-we-will-help/templates-and-g…

• 

  toniyellow on 04/02/2021 - 15:18

  +1

  Not for profit / health salary sacrifice is often called 'salary packaging' you will probably get more search results using that term if you are looking.

  If you are looking to compare on a purely financial basis you can do up a table of the two scenarios using something like https://www.maxxia.com.au/calculator/salary-packaging 

  A quick go, it sounds like you are currently making $52,000 net per year if you work every week without holidays, no sick leave and no super.

  Your future role if you were quoting 65k gross (excl super) would be something like $44340 net after salary packaging, four weeks of the year would be paid holidays, you would get however many RDOs, sick leave and ~$6175 k to super.

  But you need to adjust these for your specific circumstances particularly double-checking whether the figures are gross and net, and including or excluding super. Do you currently work every week in the year without holidays or less - if so adjust the first scenario. Some things like HECS and child support are also impacted if you use salary packaging.

  Do up a table yourself in Excel and you can figure it out the exact finances, and then consider how you value the permanency with leave benefits.

  • 

    georgelu479 on 04/02/2021 - 15:25

    just counting on the public holiday and christmas period, i am losing 1 month salary every years. I dont take any sicks leave atm but my wife is pregant for 2 months now so baby is on the way, i might need the maternity leave also some sick leave in the future soon just in case i need to stay home and take care of my little baby so if i dont work, i dont get paid.

    • 

      trex on 04/02/2021 - 15:31

      +5

      my wife is pregant for 2 months now so baby is on the way, i might need the maternity leave

      For you its paternity leave or just parental leave.

      • 

        georgelu479 on 04/02/2021 - 15:36

        +1

        sorry, my bad, it might be parental leave.

      • 

        georgelu479 on 04/02/2021 - 15:43

        +1

        For you its paternity leave or just parental leave.

        How does the salary packaging work if i decide it to go toward to our mortage payment?

        • 

          terlalu on 04/02/2021 - 16:08

          @georgelu479: depends what hospital it is, they all do it slightly different, but in general i think depending on your state, you can get some amount probably up to $15k/year or more reasonably ~$7k into an account. another poster had a link to MAXIA. That's one of them. Essentially you get a MAXIA account (just like a bank account) with a debit card that you can use for whatever you want, so you could potentially use it to pay off your mortgage. You can nominate what % of your pre-tax salary goes into this account up to a maximum $$$ (depends on your state), so every pay period part of your salary goes in there tax-free.

          • 

            trex on 04/02/2021 - 16:16

            @terlalu: ATO's FBT exemption for Public and not-for-profit hospitals is $17,000 grossed up value. This means net benefit of about $9K available as salary packaging.

        • 

          trex on 04/02/2021 - 16:09

          +1

          @georgelu479: Doesn't have to be mortgage payment as it can be any thing. Salary packaging works like this:-

          • You give up $10,000 of your salary ("salary sacrifice"). This will be deducted from your pre-tax earnings so you don't pay taxes on $10,000 that you normally would. So instead of gross pre-tax salary of $65,000, you will be getting gross pre-tax salary of $55,000.
          • Your employer gives you back $10,000 as a fringe benefit. If it's mortgage payment, the $10,000 is paid to your bank account to offset the loan payment. This is not taxable if it is below the employer's FBT exemption threshold for a public hospital.
          • You don't pay any income taxes on the $10,000 fringe benefit but it will be included and grossed up by 47% to $18,867 in your income reported for Centrelink so it may affect your child care benefit, family tax benefit etc.
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  netjock on 04/02/2021 - 15:49

  If you are public sector other people on here might be able to help you.

  In the private sector about the only thing that is worthwhile salary sacrificing is into super because instead of paying your marginal rate of tax you would be paying lower rate of 15% but the disincentive is have to wait until retirement age to access that.

  15% might have a few anti super salary sacrificing people here up in arms but if you are on 30%+ average tax rate might be worthwhile for spare change you don't need.

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  try2bhelpful on 04/02/2021 - 16:04

  I, suggest, you have a chat with an accountant but, right now, I would be looking at permanent for job security. There are trade offs with both positions and, without knowing specifics, it is hard to tell. Salary Sacrifice can mean a number of things but it can mean you get something pre tax, rather than post tax. FBT was a way to cut these perks down. Best of luck with the bub.

• 

  Meho2026 on 04/02/2021 - 16:46

  +6

  If you earn $1000/week net, thats about $1250 week gross. You have no sick leave or annual leave so calculate your figures as if you take 4 weeks leave a year, where you dont get paid, in order to compare.

  Your current annual gross salary is currently approx $60,000pa or approx $49,000 net.
  You can check the accuracy of this by looking at your last end of year payment summary.

  The hospital job pays $65,000 with sick leave, annual leave, parental leave (you only get parental leave after 12 months service).
  You will also accrue long service leave. Plus its almost impossible to get fired from a state health department, they are founded on incompetence.

  So straightaway you are earning an extra $5000/year gross.

  As a public hospital employee, you will be able to salary package $9009/year.

  Without salary packaging, you will be earning $65,000pa and paying $12675 tax earning a net amount of $52375pa.

  With the salary packaging, you will be taxed on $56,000 ($65,000 less the package amount of $9009) so you will pay $9747 tax and earn $55,253pa ($65,000 less $9747 tax)

  So thats $55,253 compared to your current net of $49,000.

  You will be better off with the hospital job but there are a few other factors.
  Some workers in the public hospital system have to share the tax saving with the health district and there are small admin fees for the packaging so you will always be better off than not salary packaging but not necessarily by that amount.

  Usually public hospital workers can also salary package meal and entertainment expenses of $2650 in addition to the $9009/year. So thats another $2650 you dont pay tax on provided you meet the criteria, which is usually just pay for 2 main meals.

  The figures I used are from the ATP simple tax calculator so it doesnt account for the medicare levy. if you want to get down to the exact dollar value use the comprehensive tax calculator on the ATO website.

  All of the companies the health districts contract to execute the salary packaging have online calculators that will show you the difference. Those calculators usually take into account everything, the reduced tax, reduced medicare levy, admin fees etc. They do present it like you have won the lotto so focus on the detail not the flashy bar charts.

  To sum up, take the hospital job, you will earn more money, have greater job security and benefit from paid annual leave and sick pay

  • 

    terlalu on 04/02/2021 - 16:56

    +2

    ^^^ this guy knows what's up. Listen to him.
    public hospital jobs have the added benefit of being under nice EBAs, so you'll get annual pay increases etc,.

    on the other hand… it looks like you're only working 3.5 hours a day with your contractor job, so you could stick with that, and drive uber or something for the rest of the day and potentially be on $100k/y working the same amount of time at a hospital only making $65k

  • 

    georgelu479 on 06/02/2021 - 12:51

    Thanks for your advice, ill take the hospital job offer :)

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  niagraBozO on 05/02/2021 - 08:32

  be clear with the Super. if its a low demand job public sector sometimes includes super as total remuneration. so 65k may include Super, or it may not.