I have been involved in salary packaging (also known as salary sacrifice) for over 12 years and it still amazes me how little is known by the general employee on this; most people think it is something applicable to the high flyers only.
I find this very strange considering at the end of the tax year, employees race to submit their end of year lodgement claim. Very few realise that a large portion of this cash flow may be eligible for claim throughout the year with the correct salary package structuring procedure.
Salary Packaging Australia
What is salary packaging and what is the advantage of salary packaging?
Salary Packaging is a way of gaining more cash flow into your pocket by calculating tax deductions from your gross income each and every pay period. It enables you to buy a range of everyday items out of your pre-tax salary rather than your after-tax salary, leaving more money in your pocket each pay.
Salary Package Example A) An increase in your net income per month of just say $50 is like receiving an increase in your salary of an average $71 per month which equate to $857 per year. If you earn $50,000 per annum you have just given yourself the equivalent of 1.71% rise for the year.
Salary Package Example B) An increase in net per month of say $100 is equivalent to receiving an increase in your salary of $162 per month which equates to $1944 per year. If you earn $80,000 per annum you have just given yourself the equivalent of an approximate 2.43% rise for the year. You can congratulate yourself!!!
What items can go in a salary package?
Who can benefit?
- Individual employees should ask how they can look at salary packaging to help with their monthly cash flow.
- If you are running your own ABN or are an Independent Contractor that is tired with procedures such as BAS statements, invoicing and paperwork, but still want maximum cash flow, salary packaging is also available for you to.
- Organisations should look at salary packaging as a way of rewarding their employees with nil or minimum cost to them.