Salary Packaging benefits all employees
There is a common misconception that salary packaging only benefits high income earners. Changes in Australian tax legislation over the last 10 years means that salary packaging can benefit almost anyone. If you earn a regular salary (wage) and your Employer is willing to allow it, salary packaging can save you thousands of dollars each year.
What is salary packaging?
Salary packaging (or salary sacrifice – as it is commonly referred) is an arrangement between you and your Employer which allows you to sacrifice part of your cash salary in return for a benefit of equal value. By sacrificing part of your taxable salary, you reduce the amount of income tax payable thus increasing your take-home pay.
Let’s use the example of someone earning $50,000 per annum that wishes to sacrifice $10,000 per annum towards a new car:
|With or Without Salary Packaging||Taxable Income||Tax Payable|
So in this example, the value of the employee’s total salary package has not changed – it is still $50,000 per annum ($40,000 cash salary + $10,000 car lease expenses), but the amount of income tax payable has been significantly reduced meaning more money in their take-home pay.
What can you salary package?
There are a number of ATO approved items that you can include as part of your salary package. Click on the links below to view a list of items that you can salary package:
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