DID you know that salary packaging is a great way to manage some of your regular expenses and potentially reduce the tax you pay?
MyState Wealth Management financial planner Adam Douglas said there were many potential benefits of salary packaging.
“Salary packaging (also referred to as salary sacrificing) is an arrangement made between an employer and employee where an employee agrees to receive a lower salary in return for benefits equal to the sacrificed amount,” he said.
“Employees generally pay tax on the income they earn, which in a salary package arrangement is lower than if the amount were included as a cash part of their income.”
The benefits the employer can provide in exchange for the packaged amount can cover a vast array of expenses.
Superannuation: Employees may be able to salary sacrifice additional amounts into their super fund every year, within allowable limits.
Everyday expenses: Some employers will allow you to package household groceries, utility bills such as electricity and gas and even petrol and other transport costs. Other everyday expenses can include school fees, mortgage or rent payments, as well as other loan and credit card repayments.
Entertainment expenses: Some employers allow you to package the cost of entertainment and meals.
Holiday and travel costs: It may be possible to package the cost of your holiday, which can help make travel more affordable.
Cars and vehicles: This is a very popular expense many employers allow their employees to package through a novated lease, which can be a great way to reduce the cost of running vehicles.
Keep in mind however, that it’s not possible to claim expenses direct debited from your bank account – for instance, private health insurance or home and contents premiums.
There are rules around fringe benefits that make salary packaging complicated and it’s important to get expert advice before entering into a salary packaging arrangement.
“These are some of the most common opportunities for people to salary package, but there are also a range of lesser-known expenses people can claim depending on where they work,” Mr Douglas said.
“What you can claim depends on your job and industry sector.
“For instance, special provisions apply to people who work for not-for-profit organisations or within certain areas of the health sector, while people working in remote areas may be entitled to additional benefits due to their location.
“Every employer has an individual approach, so check with your employer what they will allow to be packaged.
“It also pays to speak to a financial adviser about the best way to structure the package to help you make the most of these benefits.”
To find out more about salary packaging, phone MyState Wealth Management financial planner Lonnie Weeks on 1300 651 600 or visit mystate.com.au/wealth.
Information is current as at 22 January 2018. We recommend you seek independent tax advice. This is general advice only and does not take into account your personal objectives, financial situation or needs and you should consider whether it is appropriate for you.