[accordion close=”1″ title=”What is Salary Packaging?”]Salary packaging involves an agreement between you and your employer whereby you agree to forego (sacrifice) part of your salary and in return receive non-cash benefits of similar value. Benefits received in lieu of cash salary are not assessable under the PAYG system and are taxed in accordance with the Fringe Benefits Tax (FBT) Act. Put simply – you’ll be able to purchase certain things using your pre-tax salary. This means that you can reduce the amount of salary subject to income tax – so you pay less tax![/accordion]
[accordion close=”1″ title=”What can you Salary Package?”]A number of benefits are either exempt from FBT or are treated concessionally for FBT purposes and may provide the employee with a tax advantage by taking the benefit rather than salary. The level of benefit is dependent upon the employee’s marginal tax rate.
Simplygreen Salary Packaging can tailor a salary package program to meet the individual needs of each organisation.
The number of items that can be salary packaged will ultimately depend on the tax status of the organisation. The following items are generally available to ALL employees irrespective of the tax status of their Employer:
- Motor Vehicles (via a Novated Lease)
- Motor Vehicles (via an Associate Lease)
- iPads (and similar tablet devices)
- In-house Benefits
- Airport Lounge Membership
- Mobile Phones & plans
- Investment Loans
- Additional Superannuation Contributions
- Income Protection Insurance
- Professional Subscriptions & Memberships
- Financial Advice Fees
- Work Related Software
- Work Related Self Education
- Laptops and personal organizers
Some organisations are eligible for an FBT rebate or exemption. In such instances, Employees may be eligible to salary package additional items such as:
- Private Health Insurance Premiums
- General Living Expenses
- Mortgage Repayments
- Rental Repayments
- Meal Entertainment
- Personal Loan Repayments
- School Fees[/accordion]
[accordion close=”1″ title=”What is Novated Lease?”]A Novated Lease is a three way agreement between an employee, your employer and the leasing provider.
The employee has ultimate responsibility for the vehicle (as they would, had they purchased the car) but your employer steps into the lease in their place and assumes payment of lease rentals during the term of the lease. At the expiration of the lease term, the employee is responsible for the ongoing payments or refinancing of the residual value.
If employment or the lease is terminated for whatever reason prior to the lease expiry date, the novation ceases automatically. In this instance, the employer has no further obligations under the lease and the employee is able to take the vehicle with them, along with the responsibility for continuing payment of the lease rentals.[/accordion]
[accordion close=”1″ title=”What does a Novated Lease include?”]A Simplygreen Novated Lease not only allows an employee to package the costs associated with financing a vehicle, but they are also able to package the total running costs associated with operating that vehicle for the term of the lease.
The vehicle running costs may comprise of the following items:
- Vehicle servicing & repairs
- Replacement tyres
- Registration & CTP renewals
- Comprehensive Insurance renewals
- Lease Protection Insurance
- Auto Club membership
- Carbon Offsets
- Car Wash
Simplygreen Salary Packaging has the experience & expertise to budget for the total running costs at the inception of your lease As such, a Simplygreen Novated Lease also acts as a budgeting tool in that it allows an employee to package all of their vehicle running costs into one easy monthly payment.[/accordion]
[accordion close=”1″ title=”How do you pay for vehicle expenses (such as fuel)?”]Fuel – Simplygreen Salary Packaging will provide a fuel card with each Novated Lease vehicle. The employee may use this fuel card whenever they purchase fuel.
Repairs & Maintenance – Simplygreen Salary Packaging has a National Repair Network. Whenever a novated lease vehicle needs to be serviced or repaired, the supplier can deal directly with Simplygreen for payment.
Registration – Your registration renewal will be posted to the registered home address of the employee. They must forward a copy of your renewal notice to Simplygreen for processing 10 days prior to the renewal date.
Insurance – If the vehicle is insured through Simplygreen’s insurance partner, the insurance will be automatically renewed annually for the term of your novated lease. If the employee has arranged their own insurance, renewal notices will be sent to you directly by their insurer. Please forward a copy of your renewal along with a completed Expense Reimbursement Claim Form to Simplygreen at least 10 days prior to the expiry date to allow for processing time.[/accordion]
[accordion close=”1″ title=” Is there a balloon / residual value at the end of a novated lease?”]When you enter into a Novated Lease arrangement, the pre-determined value of the vehicle at the end of your lease is known as the residual value (“RV”). The RV on your lease is expressed as a percentage of the finance amount.
The minimum RVs shown below have been established by Simplygreen Salary Packaging and are guided by the Australian Taxation Office’s ruling on minimum residuals for Finance leases.
|Lease Term (Years)||Minimum RV %|
[accordion close=”1″ title=”What happens at the end of a Novated Lease?”]The employee has a number of options at the end of a novated lease:
1. Lease a New Vehicle – The employee may choose to trade-in the car and lease a new one. The trade-in funds can be used to pay the residual value on the old lease. Please note, any shortfall between the residual value and trade-in value will be the employee’s liability.
2. Re-finance the residual value.
3. Sell the car privately and arrange for the purchaser to pay the residual value. The employee must pay any shortfall between the sale price and the residual value.
4. Purchase the car by paying the residual value.[/accordion]
[accordion close=”1″ title=”Does a Novated Lease attract Fringe Benefits Tax?”]A novated lease vehicle remains one of the few components of remuneration where an after tax benefit can be provided to you. This is because vehicles are still taxed concessionally for Fringe Benefits Tax (FBT) purposes. Under a Novated Lease arrangement the FBT liability is generally charged back to the employee and is included as part of their salary package.
The FBT liability can be calculated using 1 or 2 methods:
- Statutory Formula Method or
- Operation (Actual) Cost Method.
The Statutory Method is the most commonly adopted method, as it makes no distinction between business and private use of the vehicle. Using this method, the taxable value of the car fringe benefit is a percentage of the car’s value. This percentage varies with the total distance travelled during the FBT year (regardless of whether or not it is private travel). The greater the distance travelled, the lower the taxable value will be.
The rate of FBT is determined on a sliding scale as follows (valid for leases commencing 1st April 2013):
|Total kms for year||FBT Statutory Rate|
|Less than 25,000km||20%|
|25,000km to 40,000km||20%|
|Greater than 40,000km||17%|
It is becoming increasingly popular for those employees not taxed at the top marginal income tax rate to adopt the Employee Contribution Method (ECM). Employees have the potential to reduce the amount of FBT payable on a motor vehicle to zero by making a post tax contribution towards the operating costs.
- The FBT year is the 12 months beginning 1 April & ending 31 March
- The current rate of tax for FBT is 46.5% (effective 1 April 2006)[/accordion]