Money
Issue No. 36 - August/September 2007
Is salary packaging worth it?
by Pamela Brombal
In a modern tax world where the top marginal tax rates are falling and the tax-free thresholds rising, is it still worthwhile to package your salary?
Some benefits of salary packaging are eroded, but a package can still help cut the total amount of tax paid.
Salary packaging lets employees direct pre-tax income towards benefits such as a motor vehicle novated lease, superannuation, health insurance, laptops, loans and so on to reduce their PAYG tax and increase their income.
Most employers offer the most common forms of packaging (super and cars) but this needs to be arranged in advance.
Fringe Benefits Tax (FBT) is paid at 46.5% on most items, but some attract no FBT whatsoever and it is these and the concessionally-taxed items that are worth packaging.
However, another trend is for employers to throw in fully taxed FBT benefits simply to attract, retain and motivate staff in a tight labour market.
While gym/golf/health club membership or public transport tickets offer no tax benefit, the employer can pass on bulk purchase discounts, where there are generally more than 10 employees.
Items attracting nil FBT are one laptop a year, portable printers, mobile phones and PDAs (but not iPods), briefcases (even a $2000 Louis Vuitton one) and laptop bags. Also FBT-free are airport lounge memberships, travelling lunches, newspapers, magazines and periodicals and taxis to and from work. Most relocation costs are also FBT-free and include things like: travel/accommodation/meals for the whole family in shifting location, land agent fees, stamp duty on the sale and subsequent purchase of a replacement home. Allowable in-house benefits (that is: goods received free from your employer’s business) - increased from $500 to $1000 in April 2007.
Concessionally taxed items include cars and superannuation.
Generally, the top choice for salary packaging is employee (pre-tax) super contributions. This is followed by laptops, e...
