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What is Salary Packaging?

Salary packaging involves an employee receiving part of his or her remuneration in the form of concessionally taxed or tax exempt benefits (non-cash payments), in addition to your cash salary. The end objective of remuneration packaging is to maximise an individual’s net remuneration (after tax income).

Australian Taxation Office View

Remuneration Packaging (or salary packaging) is a legitimate form of taxation planning, recognised by the Australian Tax Office. In fact, the ATO and other Government departments actively encourage their employees to advantage of the benefits of remuneration packaging, in order to maximise their after tax income.

What items can I package?

The range of employee benefit items that you can package will largely depend on the tax status of your employer. The vast majority of Australian workers will be able to package Concessionally Taxed Items and FBT Exempt Items. If you work for a Private School, University or a Public Benevolent Institution such as a charity or a hospital or nursing home operated by a charity or religious organisation, you may be able to effectively package a number of items that would normally attract Full FBT.

These items have a reduced or discounted taxable value for the calculation of FBT. The actual rate used will often depend on the benefit provided, but these items usually offer great savings for employees. Sample tax rates include:

  • 0% to 26% tax for motor vehicles
  • 50% discount for remote area allowances
  • In-House benefits

These items are not subject to FBT, meaning that these items can be provided to an employee tax-free. Some of these items include:

  • Professional Subscriptions
  • Self Education Expenses
  • Tools of Trade
  • Airline Memberships
  • Living Away From Home Allowances and
  • A host of other benefits

The full value of these benefits is used when assessing the FBT payable on these items. Mortgages, credit card payments, personal loan repayments and everyday expenditure are classified as fully taxable items. Employees of Public Benevolent Institutions may be able to package these payments as an Expense Benefit Item in their salary.

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We’ve got the tools and the information to help you maximise your net remuneration and take advantage current legislation to get more out of your salary package. Just fill in the form and we’ll be in touch, obligation free.