HUP

I have recently started a new job and was introduced to the company of salary packaging. I am awaiting the details at the moment. It all sound very bizarre but is apparantly totally legal. Basically you use it to lower your taxable income. My company brings in a specialist to set it all up for you.

In very basic terms here are a couple of the things that you can do.

1) I transfer the ownership of our cars to my wife. I then lease them back for her. The money I pay to her is tax free. I also get to package all the car costs etc and pay for them tax free. All the money is paid to my wife.

2) Same with mobile phones

There are many implications and issues that need to be considered. To do this you supply the financial advisor with a lot of information and they build up a model of how it will effect you and whether it will be of a benifit. You need to consider things like your spouses earnings and familiy benifits etc.

As I said I havn't got all the details yet and am really looking for someone who has done it.

podgypossum

Yes..

my husband does it through work too..only set it up just before christmas..you dont have to do it with just the cars you can do it for lots of things..we have our rent done through it and it works the same way with a mortgage. The company he uses is Mcmillan Shakespeare.
Basically what happens is, they deduct a fixed amount of your wages before tax. You are then only taxed on the remaining amount and the salary sacrificing company reimburses your account with the rest of your money a few days later. This way you dont pay any tax on that amount. You can also get it back dated for the year and this means we are saving around $400pm in tax

podgypossum

this link shuld give a basic idea of what its about

https://www.msa-online.com.au/SalaryPackaging.asp

rob&lucy

I do it through Queensland health and can't recommend it enough. Once it's set up by your financial advisor it's all legal and start when you set a date. I save over $1000pm by doing this as my husband can't do it in his job.

Badge

Do your employers have to agree to this, or can they pay a third party who then takes you through the same process...?

PP, you seem to have used a third party..

BM

Trevglas

A couple of points here, the salary sacrificing arrangements can only be made on FUTURE earnings, so you need to get these in place before you start work. Alternatively, you can elect for any pay rises, bonuses etc to be salary sacrificed.

The second point is tax is still liable on the sacrificed portion (fringe benefits tax), but it is the employer who cops this one. The employer is within his rights to pass the tax liability on to the employee however (that is if I understood my accountant correctly). By the way FBT is, I believe, payable at the top marginal rate (46%), no real sweat if you are well paid and paying the top rate, but a bummer if you are not!

When it comes to getting a car, you need to work to reduce the fringe benefit tax. Basically if it is used for business, the business use is FBT free. To decide on the amount of usage, it is typical to keep a log book going for 12 weeks, and the ratio of business to personal use during that time will decide the annual FBT payable: bottom line is avoid using the car for personal use for 12 weeks, then your FBT liability will be low.

One neat trick here is to get a Ute. You will look like a typical Aussie, and utes are FBT exempt!

Dave, Tracy & Emily

Sounds like what Dave and I had. salary packaging, The basic thing is you are not allowed to receive it as cash in your wage packet. Daves was paid directly into our morgage and mine was placed on a pruchasing card which looks like a visa card, but you can only spend what you have on the card. Benefit is you come out a couple of thousands dollars better off. Pain in the bum thing, if you use the purchasing card, you have to save all the recepits and send them off each month. We would do it again for sure.

jayr

Aside from getting LAFHA, which saves me about $1000/month in tax, I also Salary Sacrifice my car (which is used only for personal) as well as petrol and maintenance (they give me a Fleetcard).

The trick is to Salary sacrifice stuff where the FBT rate is lower than your marginal tax rate. For cars the formula is complicated, but I do about 15,000km a year and this puts me in a band where I am taxed at about 26%, rather than 48.5% income tax rate on my car lease payments. Petrol and I think maintenace is FBT free. In effect my petrol is costing me only about 45c/litre.

ABCDiamond

After reading this thread, I looked into it for my wife, but as her employer isn't FBT exempt in any way, it actually came out that she would be worse off, based on the things that we would package. If we packaged cars then it would be different, and we may be a bit better off, but as we don't need them just now, it wouldn't be worth it to us.

The explained reason for it not being beneficial is that the employer pays FBT on most benefits at 48.5%, which is then passed back to the employee. So she would be paying 48.5% instead of 30% tax !

jayr

Absolutely. Most packaging is only of benefit to those who do/would otherwise be paying at 48.5% and for items that get FBT at rates below 48.5% - otherwise you are just swapping your income tax for FBT and getting no benefit.

ABCDiamond

However, it would work very well if the employer "forgot" to pass the FBT cost back to you
It would increase their employment costs though, but it does happen when some employers don't know what they are doing, and try to set it up themselves

Coogee Rocks

It can be a little more complicated then that. For example if you salary package your car parking costs then you only pay FBT on the benefit of parking at your office rather then elsewhere NOT on the entire cost of parking....

Also there are 2 rates of FBT. Depending on GST and other factors.

The HR department/Payroll at your work should be able to tell you’re pretty easily whether it’s of benefit to package the items you've been offered.

Bed Of Roses

Thanks HUP for that

JUST writing the cheque to INLAND REVENUE for a gross amount of money......

At last some tax breaks for you guys in Oz i remember reading posts about stamp duty and the like on your cars etc when you purchased them and thinking gee wizz i thought uk was bad for hidden taxation...... any more pointers on saving tax has gotta be good.