wsbtroyno21

Hi,

Being a complete numpty when it comes to matters of tax and pensions and the such like, I was hoping that some of you more intellectual BE members could explain to me (in simple terms) what Salary sacrifice is all about

My employer is offering Salary Sacrifice for the purchase of one Laptop per tax year (for personal use). I know that this means you have to buy the Laptop upfront with your own money and then somehow you get it back through your wages. This is the bit that I am not too sure about.

Karma will be sent to the best replies.......lol.

Wendy

manxfamily

Cant help, but its sounds like a great idea. Must be a tax fiddle

wsbtroyno21

That's what I was thinking too.......but just not sure how it works especially when it comes time to fill in your tax return

Cosh Fulton

Here is an example from the Australian Taxation Office:
Example – Salary sacrifice

The important thing is the "Net disposable income" line in the example.

wsbtroyno21

Thanks for the link........I can see that basically you pay less tax and so get more in your wage packet so it is simply a case of instead of paying the money to the tax office they pay it to you instead? Does this affect your superannuation and medicare ? Its all too complicated for me......lol.

Cosh Fulton

Best to ask yourself if you want a new laptop each year. Your employer might want you to have a laptop so you can work from home or when travelling. Buying a new one at first then every few years when the newer models offer advantages sounds more sensible.

There is a better way to salary sacrifice - to superannuation. Your employer makes a contribution to your super above the compulsary 9%, you pay 15% tax on that not your normal marginal income tax rate (see Individual income tax rates). Of course, you can not spend that money until you retire so if you need the money to spend on a mortgage, for example, you are stuck with paying income tax on the money not salary sacrificed to super.

Australia_bound?

I do salary sacrifice for child care vouchers spend £50 and get back an £80 voucher is a very good deal costs me nothing infact I gain from it. Sounds a very similar deal best leave the accounts at your work to deal with the ins and outs

wsbtroyno21

Thanks for your replies.

I have never had to do a tax return as in the UK this was always dealt with by my employer but over here in Oz you have to do your own tax return or hire someone to do it for you. I guess I will just have to figure it out when the time comes for me to fill in the tax forms

Wendy

wsbtroyno21

We don't have to buy one every year........it's just that we are limited to one per tax year and it is not for work purposes......purely personal use only. It is just one of several offers they have made available to employees.

Wendy

NickyP

We have salary sacrificed for our car and it works out that the tax that we save pays for the petrol and general services etc. We get more tax back the more Ks that we do so it is great for us while we are exploring.
It isn't bad but we are tied into the scheme for 3 years which some people might find hard. We have also got the option to salary sacrifice for a and may consider that for our daughter when she goes to high school as she has been told that she needs a laptop because of her dyslexia. We ummmed and aaahhhd for ages about the car though as it is pretty complicated. What we have noticed though is that it reduces Ian's take home pay before anything else is taken off (including Super) so his super contributions will be reduced slightly.
Nicky

wsbtroyno21

Thanks Nicky........that is very helpful.

Wendy

Pomster

we salary sacrifice a couple of things- additional super, car and have bought a laptop.

In non-technical terms, you buy the thing. EG laptop for $2000 in April. You give receipt to payroll and say over how many months you want to sacrifice- say perhaps 2 for the laptop.
Payroll take $1000 out of your pre tax pay for April ...so if you pay higher rate of tax, this makes the take home pay about $520 less (rather than $1000). Into your bank account for May, you will get full $1000 repaid. You will see the second deduction in May and second repayment in June.
Apparently the refund cannot be made in the same month as the purchase.

We associate lease our car, which means Mr P owns it, leases it to my employer, who let me drive it....so in effect I pay about 50pct of the cost of the car, Mr P gets back the full (pre tax) part of having bought the car.

Sounds incredibly convoluted, but it can work very well.

joho

basically they take the money from your wages before tax, therefore you pay less tax. I am lucky as I work for a health service and I can use my rent against it. Only a few companies can offer this one, but a lot do the one you are on about, my hubbies does. It works in the same way as gift aid in UK, except the gift this time is to yourself.

adriang

I've been asking a lot of questions about this at work. The key one, was 'is there any reason not to do this?' to which the company secratary, who is an ex-pat himself, said that no matter what, you win, because you are paying for stuff from pre-income tax dollars, so depending on what your tax rate is, you are going to win.

I'm just in the process of arranging a car with the scheme, and once I'm more 'in tune' with how much my cost of living will actually be, I'm very tempted to get one of those new MacBook laptops.

moneypenny20

Can I have one please