The taxation laws provide generous tax concessions for not-for-profit organisations. One such concession is an exemption from Fringe Benefits Tax (FBT). This means that as an employee, part of your wages can be paid as a reimbursement of your personal expenses and no income tax is payable on this money. In effect, part of your wage is paid tax free each pay day.
There is a salary packaging limit, depending on who you work for:
This 'tax free' amount is in addition to the tax-free threshold for income ($18,200 p.a. from 1 July 2012).
When you salary package, money is deducted from your salary 'pre-tax'. You pay tax only on the remaining portion of your salary, not the salary packaged money. The salary packaging money is then paid to you (tax free) each pay day. See the example below.
As a result of salary packaging, the income tax you pay should be significantly reduced.
You can calculate your tax saving using our calculators.
The fringe benefit year is 1 April to 31 March. The figures we report will be based on this period.
Salary packaging is normally available to all permanent full time and part time employees. Casuals - check with your employer.
The example is based on an employee earning $40,000 and salary packaging $15,900 a year.
|Pre tax||Salary Packaging||-$611.50||$15,900/26 (sent to Advantage for payment)|
|Pre tax||Admin Fee||-$10.00||(paid to Advantage)|
|New Gross (taxed)||916.50|
|1. Net Wages||$863.50||BANK 1. Pay Day (Payroll)|
|2. Salary Packaging||+$611.50||BANK 2. Next Day (Advantage)|
As a result of salary packaging, the employee will receive two payments each pay. The salary packaging money is normally paid into thesame bank account as your pay. Once the two payments are added, this is your new take-home pay. In our example, the employee has an extra $135 cash for the fortnight. Otherwise, not much has changed.
At tax time you are no longer taxed on $40,000 per year, but you are taxed on only the amount after salary packaging. Your Payment Summary (was 'Group Certificate') now shows salary of only $23,840 ($40,000 - $15,900 - $260 admin fee). You are never taxed on the salary packaging money.