Salary packaging reduces your income for income tax but maintains it for Family Tax Benefit at about the same amount.
The impact of salary packaging on your entitlements or obligations does vary between government agencies. Salary packaging should not impact your Centrelink entitlements (compared to someone not salary packaging).
Some of the benefits you can include in a salary sacrifice arrangement are fringe benefits. Your employer will have to pay FBT on the value of the benefit they provide you. If your employer has to pay FBT, they may ask you to make an employee contribution to reduce the FBT they have to pay.
The payroll tax treatment of an effective salary sacrifice arrangement is: the reduced salary or wage on which the employee pays income tax is taxable wages.
Salary sacrifice reduces your taxable income, so you pay less income tax. Only 15% tax is deducted from your salary sacrifice amount compared to the rate you pay on your income, which can be up to 47% (including the Medicare Levy).
It can make it more challenging to achieve your financial goals, such as buying a house or saving for retirement. If you leave your current employer, you may not be able to continue with the salary sacrifice arrangements, which can also impact your future earnings.
Under an effective salary sacrifice arrangement: the employee pays less income tax on their reduced salary or wages. you, as the employer, may have to pay fringe benefits tax (FBT) on the fringe benefits you provide.
Taxable income is the amount you receive after you take away all your allowable deductions from your assessable or gross income. Gross income includes: Salary and wages, lump sum payments, money from business or self employment, rent, interest, investments and dividends. partnership and trust distributions.
Salary sacrificing is a regular pre-tax contribution from your regular income into your superannuation and is taxed at the lower rate of 15% if your salary package is less than $250,000 per year.
Salary sacrificing will not have any impact on your Pension Entitlement and contribution amount as these are both based on your gross salary. Before making a decision to salary sacrifice into super, you need to consider how it will affect your current financial situation.
If you make $70,000 a year living in Australia, you will be taxed $14,617. That means that your net pay will be $55,383 per year, or $4,615 per month. Your average tax rate is 20.9% and your marginal tax rate is 34.5%.
Your salary packaging deductions
When you salary package for an entire Fringe Benefits Tax (FBT) year (1 April to 31 March) the maximum you can salary package is either $611.54 per fortnight or $305.77 per week.
If your child is 16 or older and stops studying, your FTB for that child will stop. If they don't complete year 12 or an equivalent qualification, your FTB will stop from the date they stop studying. You need to update their study end date to reflect the date they ceased studying.
You might get some payments from us that aren't taxable. This means they're not included as taxable income. Some examples are: Family Tax Benefit.
If you make super contributions through a salary sacrifice agreement, these contributions are taxed in the super fund at a maximum rate of 15%. Generally, this tax rate is less than your marginal tax rate. The sacrificed component of your total salary package is not counted as assessable income for tax purposes.
Centrelink has very wide powers to thoroughly investigate deposits that have been made into your account. For example, it has the power to obtain your information from other government agencies as well as accessing information from banks, building societies and credit union accounts.
We'll start to reduce your payment if your income is more than $150 a fortnight. Your payment will reduce by 50 cents for each dollar of income you have between $150 and $250. If your income is over $250, your payment will reduce by 60 cents for each dollar of income over $250.
Salary sacrifice reduces your taxable income, so you pay less income tax. Only 15% tax is deducted from your salary sacrifice amount compared to the rate you pay on your income, which can be up to 47% (including the Medicare Levy).
If your income is low, salary sacrifice may not be beneficial because the 15% tax rate on super contributions may be higher than the tax you would otherwise pay. Read more about choosing the best super contribution for you.
Car salary sacrificing is a great alternative to running a fleet of company cars, with a lot less stress and effort involved. Employers carry no risk in car salary sacrificing. If the employee leaves, they are the one who will need to make car payment arrangements with the finance company.
What Happens if I Salary Sacrifice Too Much? If you salary sacrifice too much, the excess salary sacrifice amount will be assessed and taxed at your individual tax rate for the financial year, minus a 15% tax offset received to account for the contributions tax paid on the salary sacrifice amounts.
There's no limit on how much you can salary sacrifice into super. However, it's important to consider your concessional contributions cap. This is currently $27,500 per financial year.
If you are renting a property you can salary package your rental costs as long as the lease agreement is in your name and you are 100% responsible for the cost. To get started, you must provide a copy of the lease agreement which should include lease start and end dates along with the rent cost..