Salary Sacrificing -benefits?

Hi Giddo,

The employee benefits because all payments for ‘packageable’ items are made before tax.

For example assume your superannuation costs you $3000/annum and is normally paid from after tax income and it is a packageable item.

On a salary of $50k/annum your tax is normally $10860 leaving a net salary of $39140. From this you make super payments of $3000 which results in a ‘take home’ pay of $36140.

Now assume you choose to package the $3000 payment. This payment is made from your gross salary and therefore reduces your taxable salary to $47000. On $47K you pay tax of $9960 which means you now end up with a ‘take home’ pay of $37040.

I am aware of packing benefits including some of the bigger ticket expenses such as home mortgages, novated leased cars, medical insurance, superannuation and also some of the lesser lights such as mobile phones and laptop computers. Some items may incur a fringe benefit tax.

The employer gains in that they do not necessarily have to increase the gross salary to an employee – the effect of packaging can result in a net salary increase to an employee, but not a gross increase, thus keeping one of the more significant costs employers face ‘down’

Obviously salary packaging is more advantageous for higher income earners and the range of packageable items varies from employer to employer. a recent article in the Australian argued that packaging has become somewhat less effective with the changing tax scales.

Derek
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http://www.pis.theinvestorsclub.com.au
0409 882 958