I have been offered a job at a not for profit organisation, 70k + super + salary packaging. I have no idea as to what the salary packaging means. I've tried to google it but it's confusing me even more. What do I have to do to get benefits out of this scheme? Kindly explain without making fun of me.
What is Salary Packaging? Please Explain in Layman Terms.
Lkaz8743 on 22/09/2022 - 17:58
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Very very simple terms:-
- Your salary is $70,000.
- You salary sacrifice (package) $5,000 of that towards say leasing a car.
- Your effective salary is therefore $65,000.
- So you get income taxed at $65,000 instead of $70,000 and hence pay less income tax.
More info laid out here: https://www.salary.com.au/how-it-works
and super contributions by employer are less, based on income of $65k instead of $70k
They are?? I've been on SP for 3 years and stupidly never knew this
Thanks for that info @Teerx
this was legislated out as tight wad companies took advantage of it.
one employer did it to me ~2016, from that day on i decided to changeActually there was two problems the old system.
The second point is below.
To make it nice and simple I am going to assume super is 10%.
If your income is $70,000 excluding GST. Your company would be required to employer contribute $7,000.
If you decided to salary sacrifice $7,000 to superannuation. Under the old rules the salary sacrifice $7,000 could be recognize and reduce the employer contribution amount. In this case the employer would need to contribute $0. This changed on 1st of January 2020. Note some awards and EBA prevent this. Also it depends on the terms and conditions of the salary sacrifice.
This is all you need to know!
But fringe benefits tax applies to most salary sacrifice items. Especially cars.
Salary sacrificing more of your salary into superannuation means you dont pay income tax on that portion
However 15% contributions tax is deducted.So one must do the maths or consult an accountant
Is it a $30k FBT cap or $17k FBT cap non-profit?
$15900 I think
You can swap $15,900 of you salary then for ‘stuff’ and not have to pay tax on it. Saving you $5088 in tax.
Thanks for that info.
Not exactly. Its not that simple unfortunately.
Fringe benefits tax then applies in many cases
If sacrified into superannuation then 15% contributions tax applies
It depends the type of non-profit. Some don't even get the exemption.
https://www.ato.gov.au/rates/fbt/?page=1#Capping_of_concessi…
Saying that the non-profit should be aware of the concessional treatment to FBT and which items are included in this.
Still spend your own money, save tax rate. Available on some items only.
The salary packaged amount is deducted from your gross income and paid to you separately tax free.
The remainder of your salary is taxed at the normal rate on the remaining amount only.
Therefore it reduces the tax you pay.
For example if you package $9000, you only pay tax on $61,000 plus receive the $9000 tax free.Thanks for that info
Just a heads up that if you're paying HECS, sometimes company will take HECS out based on your after tax amount. But as HECS is based on pre-tax, you'll actually be left with the difference at the end of the year. Just a heads up as it catches many people in their first health job out of uni if you went that route.
It's not based off your pre-tax income. It's based off your "repayment income" which consists of:
taxable income – not including any assessable First Home Super Saver (FHSS) released amounts
any reportable fringe benefits (regardless of the exempt status of your employer) —- this is where salary packaging benefits come in
total net investment loss (which includes net rental losses)
reportable super contributions
any exempt foreign employment income amounts.What's the difference? The salary packaging benefits are grossed up. So you might only receive ~$9k worth of salary packaged (fringe) benefits, but you will repay the HELP debt as if you got ~$17k.
I want to maximise my benefits out of salary packaging without leasing a car. I have already got a 2022 RAV4 paid off, do not need a car whatsoever.
But I do have other everyday expenses like everyone else. We pay mortgage payments every month, mortgage is solely in husband's name. Can I still claim it on salary packaging?No
Not sure if mortgage payment for your husband would work. But if the mortgage was in your name, you could ask your employer to make mortgage payments from your pre-tax salary up to $17,000.
For $70,000 income your top tax bracket is 32.5% plus 2% Medicare levy, which you will not need to pay on the $17,000 which is deducted from your pre-tax income and paid towards your mortgage. So, your benefit is 34.5% of $17,000.If you are not in the not for profit sector your employer will need to pay 49% fringe benefits tax on the grossed up value of $17,000 or you will need to make a post tax contribution to avoid paying fringe benefits tax on the expense benefits (payment of mortgage). As a not for profit sector employee, government allows this benefits which then allows the employers in these sectors to attract employees at lower wages.
I also work for a PBI and have the same package as you.
If you live together you should be able to. I was able to use my parents mortgage while living with them even though I contributed $0 to it and my name was not included anywhere.
Definitely speak to the payroll staff. Mortgage payments would be the easiest. You just provide the reciepts of mortgage payments totalling $15900, they deduct the $15900 from your salary so that you only pay tax on $54100. You should get $1325 reimbursed tax free every month with your pay to total the $15900 that was deducted.
This calculator really helped me https://www.smartsalary.com.au/calculator/ - it's what my employer uses to calculate my salary package (add $15900 back to the take-home income provided by this calculator to get your full take-home pay)
It's difficult to understand even with a bunch of people explaining, I don't blame you for being confused!
Thanks for that info.
Thank you. Exactly, I tried to explain and thought, this isn't going to make much sense. It is simple in my mind, but not an easy concept to explain because income tax and fringe benefits tax need to be explained too.
Was it smartsalary that you were able to package your mortgage with even though it wasn't your name on the documents? Did you have to explain anything or just submit as normal? Thanks!
I spoke to our salary packaging manager and said I live with my parents and they pay the mortgage, and that I don't have $15900 worth of expenses.
He said that because it's my primary place of residence I can use their mortgage documents because even though my name isn't on the documents, it's my residence. I just had to provide evidence showing that it was my primary place of residence (bank statement, bills, university letters etc.) and he said that's all I need.
I used their mortgage to package for 3 years until I got my own mortgage. Our company uses smartsalary but it should apply to all companies.
I have already got a 2022 RAV4 paid off, do not need a car whatsoever.
What about your partner?
My Dad did salary packaging for two cars in a previous job. One for Mum and One for Him.
You can sell the car to a lease company then lease it back via salary sacrifice.
Salary Sacrificing = Good
Couldn't agree more. I did one for a new car this year and its been great!
Does the car have to be work only or can be used for personal use or even just own use like a gift or something.
It does a certain % of Business vs Personal and you just have to keep a log. I got an app called DriversNotes which allows me to do it.
Some months are higher personal than work on my % allocation, but that is fine. The log is only if you get audited.
I am still as confused as I was previously.
Say, you buy a laptop or phone. You would normally pay after income tax. With salary packaging you pay with the pre-income tax and lower your taxable income.
https://moneysmart.gov.au/income-tax/salary-packaging
this might help tooI get that but how will it work? Will my pay be withheld or do I have to keep the receipts of groceries/ laptop/ phone /petrol etc?
Ok it'll all be done for you after the initial set up.
Medical professionals able to claim back their dinners on tax. Is that the same as salary packaging.
Pro tip the alpha of the group will normally pay the bill.
Oh if I could write off all my food expenses work and non work related I could probably use that extra money to a computer
We do not go out for dinners.
You should. Treat yo self, yea?
We are vegans, hardly any good vegan restaurants around the area in which we live.
if lets say you can salary sacrifice $300 worth of good… is that the tax benefit the same as if you purchase $300 worth of good without salary sacrifice, but then claim as deduction during tax return?
Pretty much you want to do it. You might pay a small amount per pay to get a much larger after tax money in your bank account. The salary packaging company you guys r with, will explain it to you properly as most of the time you can set up a phone meeting to discuss. It just rediced your tax and increases your take home pay by claiming things like living expenses (rent/mortgage) in your salary, PRIOR to tax being deducted.
I just saw you're still super confused (as i used to be as well) so I'll break it down further. Start with just claiming living expenses as it's the biggest salary sacrifice deduction with a nfp. Figure out the dinning etc later. You can dm me if you're still super stuck btw. On a salary of say $4k per month, if you claim mortgage or rent up to the total amount (i think around $14k from memory) you'll get around an extra $800 in your pocket.
Jesus christ, these are some super unhelpful comments. If you work for a non profit, you can just salary package your mortgage repayments. This means that you won't pay tax on that $15,900 as you will make your mortgage repayments pre-tax.
You will also, if you want, be able to salary package 'meals & entertainment' - I'm unsure on the current cap on this. Lots of orgs will issue you a credit card to pay for dining out, but see if you can submit receipts instead (this is what I do) as then you can submit any receipt without having to pay for the entire bill on your card.
HI kaz8743
I am doing salary packaging for the last 3 months. No one could have explain exactly for it was, even the customer service from the company i am using (MAXXIA company)
If it s the same offer as mine, it s very easy to use it, you ll will be able to choose between 2 choice :
1/ you can get a card from them ((MAXXIA) and pay anything with it, but you will have a limit and need to choose how you re going to spend it (grocery / morgage / utilities … )
or
2/ anything you re buying, just keep the receipt, take a screen shot with your app (maxxia app), go under credit card expense. There is no limit doing it this way (up to around 15900) so you don t have to know before how you re going to spend your money.
you will be getting around 650 / week (maximum) tax free from your pay (Maxxia runs from APRIL to APRIL) (so if you are starting now you ll be able to get much more weekly. ), when you ll get your fortnight pay, MAXXIA will take 650 from it , so you won t pay tax on this amount, they will send it to back your bank account around 2 days later.
Also depending of the non profit organization you will work for, you can claim up to 10 years back any payment made (insurance / utilities / groceries …). for example i claimed all the invoices from my car for the last 6 years (and i just start using maxxia 3 months ago)
The process will cost you around 7 dollars (Maxxia fee) by fortnight.
thanks for this useful info bennarra
If it’s a not for profit ask them who they use. Here is an example of a popular company used with info on what it means for you
https://remservsalarypackage.com.au/salary-packaging
CodeXD on 22/09/2022 - 17:59 Comment score below threshold.