What is salary packaging?
Salary packaging is an ATO-approved employee benefit that allows you the ability to spend your pre-tax dollars. But it can also seem quite complicated in the beginning.
Primarily you get paid in return for the work you do but before this occurs your employer deducts income tax. The remaining balance is then transferred to your account. From there you pay for all your costs of living and if you’re lucky you might decide to put a little away for a rainy day.
Salary packaging flips this around and your employer pays you the same salary, but you can pay for certain expenses before the tax is deducted, rather than after. Overall, this could help you reduce your taxable income and give you more money to spend on the things you want.
What can you package?
Depending on your employer, the industry you work in and certain individual circumstances, the benefits you may be able to package include car repayments, work-related devices, mortgage and rent payments and everyday expenses including utility bills. Most people could reduce their taxable income by salary packaging a few everyday expenses.
HOW MUCH COULD SALARY PACKAGING SAVE ME?
A quick salary packaging example
Alice earns $70,000 per year. She works for QLD health, and her employer allows her to salary package these everyday items up to a cap of $9,010 per Fringe Benefit Tax year. By salary packaging up to the full $9,010 permitted, she could be up to $2,964.78 better off each FBT year. This amount doesn’t include other salary packaging benefits she could be entitled to. (Please note that the amount Alice can salary package depends on her employer’s salary packaging policy. Please contact our office today to discuss the amount you may be able to salary package given your individual circumstances.)
Should I salary package
Depending on your personal circumstances you could reduce your tax payable each financial year. However salary packaging can be quite complex and requires a further discussion with a financial adviser. Bronson Hills which is one our financial advisers at Kelly Wealth specialises in this area. If you would like to book a complimentary appointment you can contact the office on 07 4041 2055