Salary sacrificing, also known as salary packaging or total remuneration packaging, is an arrangement between you and your employer. In this setup, you agree to receive a lower income before tax, and in return, your employer provides certain benefits that hold similar value. This arrangement can result in paying less tax on your earnings.
Tax Benefits of Salary Sacrificing
Opting for a salary sacrifice arrangement reduces your taxable income. Consequently, this can decrease the amount of tax you owe on your income.
Important Note: It’s crucial to seek financial advice before deciding to enter into a salary sacrifice arrangement, as we do not provide guidance on whether to accept or reject such an arrangement.
Including Benefits in the Arrangement
There are no specific restrictions on the types of benefits you can include in a salary sacrifice arrangement. The key factor is that these benefits should be a part of your overall remuneration, effectively replacing the salary you would have otherwise received.
Fringe Benefits
Some benefits within a salary sacrifice arrangement are considered fringe benefits. For these, your employer is required to pay Fringe Benefits Tax (FBT) on the value of the benefits provided to you. To offset this cost, your employer might ask you to make an employee contribution, which helps reduce the FBT they need to pay.
Common Fringe Benefits
Here are some common fringe benefits that can be included in a salary sacrifice arrangement:
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Cars
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Goods
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Shares
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Payment of expenses such as loan repayments, school fees, and childcare costs
If you have any questions or need further clarification, please feel free to contact us. We understand that everyone's circumstances are unique. You can reach us at 0415 095 684.
