JOHN GLOVER: Hello and welcome to Pendragon’s Straight Talk. Now today’s question is what is salary packaging. Now, salary packing basically is a way where you can make purchases from your pre-tax income, mainly for work reasons but you can do it for other stuff as well. Your pre-tax, that means that you are taxed at a lower rate and you get more money into your back pocket each pay.
Now what you’ve got to watch out for is fringe benefits tax. You’ve got to make sure none of these things have a fringe benefits tax on them because there is not much point saving tax in one direction and paying more tax in another and fringe benefits tax actually is 48.5% so it’s a very high tax.
There is some cases where you can look to remove the FBT or sometimes companies can be exempt from it, but you’d have to talk to your accountant and your company to see if that’s applicable.
If this is done right, if salary packaging is done right, companies, it gives companies a way to reward their employees and it gives individuals a monthly cashflow and they can play or put more into their super.
Salary sacrifice or packaging is an arrangement between an individual and an employer where they forgo part of their future entitlements for other benefits. So they forgo some of their future entitlements for other benefits, such as things like vehicles, travel expenses, clothing, gifts, home office, dividends, interest, self-education and tools and equipment to name a few.
As I said earlier, everyone can benefit, companies can use it as a way of rewarding their employees with minimal or no cost to them, employees they get an extra cash flow, they can maximise their super and in theory they get to have a bit more of a financial control over their income.
We call it playpackets not paypackets and I recommend that you talk to your company or your accountant and see if you can include any of these into your future pays.
Thanks for listening I look forward to talking to you next time.
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