garyfish1968

Hi all
Can someone please explain salary packaging. My wife's job offer in melbourne includes $16000 salary packaging.
I have read lots of threads about the subject but we are not sure how it works.
for example this would equate to $1200 a month so do we have to spend it, someone mentioned they put it on their credit card. Does this mean they buy for example their shopping and pay it off with this money.
i also noticed that car leasing has something in it about salary packaging???
so confused about this, please help.
many thanks to anyone that can clear this up.

quoll

At the moment (and the Henry Tax Report is making recommendations that this be stopped for non profit organizations by the way) some charities and hospitals allow their employees to salary sacrifice. For me that means about (I cant remember exactly) 630 per pay gets sent to an intermediary before they calculate my income tax. The intermediary then charges me about 11 per pay and puts the remainder back into my bank account because I have demonstrated that I have paid that amount on living costs (I dont have a mortgage, rent or private loan to pay it against, most people use it against those costs) - I provide a few months credit card statements instead. So effectively you get around $16k pa tax free. Some of my colleagues actually have a credit card with that amount issued by them (not sure how they do that exactly) but I already have enough credit cards and didnt need one of theirs which didnt give me frequent flyer points!)

Cars are a different ball game - there are some catches there because there are mileage restrictions - you would want to check that out but the last time I looked at sacrificing into a car you had to do 25k km or it wasnt worth it in terms of the tax breaks.

If the Henry review gets adopted then that incentive for working for NFP organizations will disappear - the rationale is that those organizations cannot afford to pay commercial rates for their employees and so this is a bit of a sweetener.

ozzieeagle

You allocate a credit card or Mortgage where you wish your salary packaging deduction to go. The money from your wages gets allocated pretax hence saving you whatever tax rate you would have been on for that part of your wages.... usually around 33 pct.

Wife works at the Royal Melbourne, and does not know once person that uses the package for car leasing, we've checked that continuously, probably because with around 16,000 dollars only able to be claimed it's best put towards Mortgage and credit card debt (aka groceries and other household expenditure, or whatever else you want to use your credit card for).... If your wife works in the Government health system then there is also an additional food and entertainment component to this, which we use at 200 bucks per fortnight... great for holidays, the odd meal out or takeaway. You can use the food and entertainment card anywhere in the world and still save tax on your wage in Aus, Partners can use it too..

Basically it gives a 70,000 dollar wage the spending power, or take home component of a 90,000 dollar wage, by reducing tax.

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ozzieeagle

Not heard anyone talking about this amongst the nurses in Melbourne. If that were adopted it would mean a real 20,000 k cut for most nurses in the health system. I dont think the government would be able to stand the ramifications of that. Seeing as 35 pct of the nurses are from overseas in the first place... I'm certain cutting that component would cause a massive nursing shortage. Very certain my wife would leave in those circumstances.

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quoll

Have heard it a couple of times but, then, it has been mooted before as well so hopefully will come to naught. It may be one of those things which are "leaked" first to see what the reaction would be but it's definitely out there and has the NFP sector in a bit of a spin. http://www.probonoaustralia.com.au/n...g-henry-report