If you salary package for a full 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.
The salary sacrifice super limits for the 2023/24 financial year are calculated as the difference between $27,500 and your employer contributions received, as well as any personal concessional contributions.
The combined total of your employer and salary sacrificed contributions must not be more than $27,500 per financial year. You can carry forward any unused concessional contributions. Unused amounts are available for a maximum of five years.
In order for AccountRight to calculate the amount of salary sacrifice to deduct you do need to enter a calculation basis. If your employee wants to sacrifice 100% of their wages then you would set the calculation basis to 100% of gross wages.
Salary sacrifice is an arrangement with your employer to make additional superannuation contributions from your pre-tax salary each pay cycle. Your employer makes additional contributions on your behalf. These contributions are taxed at 15% instead of at your personal income tax rate.
The value of this benefit is paid from your gross salary, i.e. before tax. This means that your gross salary is reduced by the cost of the benefit before the income tax is calculated.
If you have a very low income, your income tax rate may be lower than the 15% contributions tax deducted for salary sacrifice, so you could pay less tax by making after-tax contributions rather than salary sacrifice.
Benefits of a salary sacrifice car loan
Income tax savings: Your taxable income can be reduced by your salary sacrifice, which may decrease your tax liability. The higher the applicable tax rate, the more you may save.
If you decline a salary sacrifice request, your employee can make a personal contribution and later claim a personal tax deduction (subject to eligibility and caps). This can ease your admin burden and give you peace of mind that your employees have another option to save on tax.
Concessional contribution limits 2023 - 2024
For the 2023 - 2024 financial year, the concessional cap is $27,500 for all individuals regardless of age.
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..
Who benefits? Salary sacrificing is usually most effective for people on middle to high incomes. Once you pay 32.5% or more in tax, you can do more with your pre-tax dollars. For example, you might package a salary of $125,000 to receive $90,000 as income and a $35,000 car as a benefit.
Salary sacrificing is also known as salary packaging or total remuneration packaging. You and your employer agree for you to receive less income before tax and in return your employer pays for certain benefits of similar value for you. This means you pay less tax on your income.
You can salary sacrifice your mortgage repayments if your employer allows it. This means your take-home salary shrinks, but so does the amount of tax you pay. It's a cost-effective benefit but one that most employers can't offer because they have to pay fringe benefit tax (FBT) on the repayments.
Possible cons
Under a novated lease, you don't technically own the vehicle. This means you are unable to make any alterations to it, and cannot claim the car as your own asset for other borrowing or financial purposes.
Benefits of salary sacrifice
You can pay less tax. These contributions are taxed at 15%, which is generally lower than the tax you'd pay if you received it as take-home pay. It can reduce your taxable income so you may pay less income tax.
Salary sacrifice allows you to pay for a car from your pre-tax income. The most common way to salary sacrifice to pay for a car is through a novated lease. You buy a used or new car, and your employer covers the lease cost. The lease payments are made from your pre-tax income, which reduces your tax liability.
If you make $80,000 a year living in Australia, you will be taxed $18,067. That means that your net pay will be $61,933 per year, or $5,161 per month.
Salary sacrificing is usually more effective for people on middle to high incomes, according to ASIC's Moneysmart. But generally, Moneysmart says salary sacrificing super can be tax-effective if you earn more than $37,000 per year.
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.
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%.
Example: Say an individual earns $100,000 a year and wants to lease a new car. The lease paymenets and running cost of the car will cost $22,000 each year,. Had they entered into a salary sacrifice agreement with their employer, the $22,000 for the car would be taken out of their taxable income before the tax is paid.
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).