vicki78

Hello all,

Could someone please explain in plain english how salary packaging works?

I have just started working 3 weeks ago and have this option available from my employer. I do understand that they take off a certain amount of your wages before being taxed towards whetever you want to package, but how does it actually happen? And when do you receive the money for the item that you are packaging for? I was thinking not a particular item such as car, but paying towards rent, mortgage and living expenses. And how much would they take off my fortnightly wages or does that depends on what you packaging for?

With regards to superannuation, if you choose to package for that, do you get a lump sum?
I'm sorry but this really confuses me.

Many thanks.

MarkMC

Basically you are saving the tax/gst on the item.

So for a car, the normal monthly costs would be lease payment plus some towards servicing plus petrol costs, plus some towards tyres etc. say $1000.

So WITHOUT salary sacrifice you would loose $1000 from your in the bank money each month.

WITH salary sacrificing the GST is claimed back by the employer, so you $1000 costs now drop to $900, and this $900 is taken from your wages before the tax man has his cut. so you only loose $700 from your in the bank money.

Does that make sense?

Not sure how the super thing works?

ABCDiamond

The above items may attract a different tax instead, Fringe Benefits Tax at 46.5%, unless you are in an employment category that is exempt from FBT.
You would need very specific advice for this.

ABCDiamond

The super payment will be paid directly to the super fund.

If you package your super, then your employer currently has the option to NOT pay the compulsory super, and can treat the sacrificed figure as that payment, if they wish to.

paddyo

Right Vicki, firstly what sort of Visa are you here on? Are you entitled to LAFHA?
As an example, I am here on a 3 year 457 Business Class Visa. My salary package is thus: Basic Annual Salary xxxk plus Super (this means they add Super (mininum of 9%) to my salary and this is paid into my nominated fund), then I am eligible for LAFHA which is a Tax benefit to take into account food and rental expenses, the food element is a fixed amount set dependant upon your family, the rental is a 'reasonable amount' based upon your family and area prices, but is pretty flexible, I get $700 per week rental element. I also have a Novated Lease Vehicle which costs me about $1300 per month.
What this all means in relation to my salary package is that when I get paid, my LAFHA, Super and Novated Lease are all subtracted from my Basic, THEN I am taxed on the residue. That is then my TAXABLE salary (bearing in mind it must not go below the mininum level for my 457 class). The LAFHA, Super and Novated Lease amounts are then added back to my Taxable salary which is then my take home pay.
So the saving is in Tax paid, you are not GIVEN any money you just have more in your pocket when salary is paid.
Any of this help?

vicki78

Hi,
Yeah, I think I got it.
I'm on PR. One more thing though. How do you get the money? Because I want to package for rent or mortgage, do they then pay the estate agent or the mortgage lender directly with the money they take out from my salary or is it put aside and they pay when it reached the $9000 which is the maximum amount you can have?
Cheers.

paddyo

Ok, well on PR you won't get LAFHA. If your company has stated that they will pay you an allowance for rental/food etc then that is a local agreement between you and them. Is the $9000 per month, week or Annum? Per annum it obviously helps but is not really a lot. Per month would be very generous. Per week would be....who the bloody hell do you work for, I want a job!!! lol
In all seriousness, you should ask them how they maintain the package as it is obviously personal to your position. My assumption is that its an annual $9000 allowance which is added to your salary, whether or not that is then taxed is another thing.

louH

Is your company/organisation using someone like Selectus for the packaging?

You won't see the cash - it'll go directly to your mortgage company/bank.

I'm a bit confused about your $9000 ref too but if you work in an not for profit org (see ABC's post) you should also be aware there is a $30,000 cap on FBT exempt amounts

EvannTel

I'm watching this with interest as the OH has just got a job that allows such salary sacrifiing being under the definition ABC gave.
Must admit the $30K intrigues me as I think (if I understand this) thats the grossed up amount for FBT purposes which means you can't actually sacrifice the whole $30K?

daunted

Hi
I have also just signed up for salary packaging my mortgage in my new job. Your employer will pay the the amount to the mortgage company/rental agency and then you will recieve the rest of your wage without that amount. you can top up the payment with a direct debit if Salary sacrifice isnt enough. Ie I will be sacrificing maximum allowed amount of mortgage payment fornightly which is $150 less than my required payment, so i have just adjusted my direct debit to $150 and let work pay the rest of it from my gross pay

$9000 is the maximum amount per year you can sacrifice on this

EvannTel

Hi Mandy

That amount depends on the sector you're in. The OP will need toi check under which they category the fall in as it could be more.