Salary packaging: Difference between revisions
Ironman1104 (talk | contribs) |
EV uptake encouraged |
||
| (56 intermediate revisions by 34 users not shown) | |||
| Line 1: | Line 1: | ||
{{Short description|Australian term for manipulation of employee benefits}} |
|||
'''Salary packaging''' (also known as '''salary sacrifice''') is a term used to refer to the inclusion of [[fringe benefits]] in the remuneration package of an employee, in exchange for giving up part of their monetary salary. |
|||
{{Personal finance}} |
|||
'''Salary packaging''' (also known as '''salary sacrifice''' or '''salary exchange''') is the inclusion of [[employee benefit]]s (also called fringe benefits) in an [[employee]] [[remuneration package]] in exchange for giving up part of monetary salary. Such arrangements are entered into most commonly if there are tax or other benefits to be derived by the employer or employee from the arrangement.<ref name="SP">{{cite web |last1=Clara |first1=Parker |title=Salary packaging |url=https://moneysmart.gov.au/income-tax/salary-packaging |website=Money Smart |access-date=22 December 2020}}</ref> |
|||
==Salary sacrifice in |
==Salary sacrifice in the United Kingdom== |
||
| ⚫ | In the United Kingdom, employee benefits commonly included in salary sacrifice arrangements are pension contributions, childcare vouchers, and annual leave.<ref>[http://www.hmrc.gov.uk/specialist/salary_sacrifice.pdf HMRC - Salary Sacrifice]</ref> If correctly structured, the arrangement can benefit both parties as it saves them both [[National Insurance|NI contributions]] as well as save the employee income tax.{{Citation needed|date=November 2019}} |
||
| ⚫ | Salary sacrifice can be extended to any range of benefits and has become increasingly popular in the public sector as well as for transport-related benefits e.g. cycles, bus travel, low CO<sub>2</sub> emission cars, and more recently in 2020 vehicle maintenance. Salary sacrifice is also commonly used to fund the introduction of Flexible Benefit Plans in the UK.{{Citation needed|date=November 2019}} |
||
| ⚫ | |||
| ⚫ | Salary sacrifice can be extended to any range of benefits and |
||
==Salary packaging in Australia== |
==Salary packaging in Australia== |
||
Contrary to popular belief, provisions in the FBT (Fringe Benefits Tax) act allow for the employees of private companies to utilise.<ref>[http://eziway.net.au/salary-packaging/what-can-i-package/ salary packaging benefits]</ref><ref>{{Cite web | url=http://www.comlaw.gov.au/Series/C2004A03280 |title = Federal Register of Legislation - Australian Government| date=15 September 2023 }}</ref> |
|||
Legislation introduced in the 2008 budget by Australian Prime Minister [[Kevin Rudd]], with immediate effect from May 13 2008, effectively closed a loophole in taxation law which had allowed high-salaried individuals to get a laptop computer almost for nothing. By purchasing a laptop via salary sacrifice, buyers would not pay tax on that part of their income, a saving of up to 45% for workers in the top tax bracket. Such laptops were also exempt from [[fringe benefits tax]] (FBT), which is paid by the employer on non-cash benefits which accrue to employees, so neither side came out worse from the deal. |
|||
Individuals could also then depreciate the laptop(usually over a three-year period), scoring further deductions on their taxable income each year. If you sold the laptop as second-hand at the end of that period, it might even prove possible to make a profit on the deal.That rule had been in place since 1995, but everything changed with the May 2008 announcement, which eliminated the double-dipping option. While you can still purchase a laptop (or other technology items, including PDAs) under salary sacrifice rules, they are, however, subject to full FBT liability, and you cannot then additionally claim the depreciation on those items against your personal income. Therefore, only one level of tax saving is allowed. |
|||
{{main|Fringe benefits tax (Australia)}} |
|||
Items commonly salary packaged include: |
Items commonly salary packaged include: |
||
* vehicles (either a [[company car]] or through a [[novated lease]]) |
* vehicles (either a [[company car]] or through a [[novated lease]]) |
||
| Line 18: | Line 18: | ||
* [[laptop computer]]s |
* [[laptop computer]]s |
||
Some companies also allow their employees to salary package other items, including household utility bills, although this is complicated and normally requires the assistance of a third-party company who specialise in salary packaging arrangements. |
Some companies also allow their employees to salary package other items, including household utility bills, although this is complicated and normally requires the assistance of a third-party company who specialise in salary packaging arrangements. Salary packaged benefits in Australia generally attract [[Fringe Benefits Tax (Australia)|Fringe Benefits Tax]] within the [[Taxation in Australia|Australian taxation system]], with a few exceptions - some benefits are Fringe Benefits Tax exempt, including mobile phones and laptop computers if used for work purposes.{{Citation needed|date=November 2019}} |
||
Charities and public |
Charities and public not for profit hospitals can do this most effectively as they are exempt from fringe benefits tax up to a certain limit per employee (from 1 April 2014 the amounts are $9,010 for Not-for-Profit Public Hospitals and $15,900 for Public Benevolent Institutions). Additional benefits can be packaged above these limits through novated leasing, meals and entertainment or venue hire (holiday accommodation)<ref>[http://eziway.net.au/salary-packaging/about-salary-packaging Salary Packaging]</ref> as well as personal superannuation contributions subject to Concessional Contributions Caps.<ref>[http://www.ato.gov.au/individuals/super/in-detail/employer-contributions-and-salary-sacrifice/salary-sacrificing-super/?page=3#Concessional_contributions_caps Concessional Contributions Caps]</ref> |
||
The Australian Salary Packaging Industry Association <ref>[http://www.aspia.com.au/ Australian Salary Packaging Industry Association]</ref> is the professional body for outsourced salary packaging service providers. |
|||
Salary packaged benefits in Australia generally attract [[Fringe Benefits Tax (Australia)|Fringe Benefits Tax]] within the [[Taxation in Australia|Australian taxation system]], with a few exceptions - some benefits are Fringe Benefits Tax exempt, including mobile phones and laptop computers. |
|||
The Australian Taxation Office<ref>[http://www.ato.gov.au/Non-profit/ Australian Taxation Office]</ref> administers Fringe Benefits Tax and the FBT Exemptions that facilitate salary packaging for employees of not-for-profit healthcare organisations and public benevolent institutions. |
|||
The long-awaited FBT exemption for electric vehicles passed through the Senate in Dec 2022. This move is part of a broader plan by the Government to increase the adoption rates of EVs in Australia, which are among the lowest in the developed world. The electric car discount policy has allowed employees to salary package an eligible vehicle and save thousands in income tax. <ref> https://www.easifleet.com.au/blog/ev-novated-lease-best-option/ </ref> |
|||
<ref>{{Cite web |title=Eziway News |url=https://eziway.net.au/ESP/SalaryPackaging/eziway-news-and-articles-details?QXJ0aWNsZUlkPTc0 |access-date=2022-12-22 |website=Eziway Salary Packaging}}</ref><ref>{{Cite web |last= |first= |date= |title=Treasury Laws Amendment (Electric Car Discount) Bill 2022 |url=https://www.aph.gov.au/Parliamentary_Business/Bills_LEGislation/Bills_Search_Results/Result?bId=r6876 |access-date=2022-12-22 |website=www.aph.gov.au |language=en-AU}}</ref> |
|||
==References== |
==References== |
||
{{Reflist}} |
{{Reflist}} |
||
*[http://www.ato.gov.au/businesses/content.asp?doc=/content/38336.htm&mnu=6041&mfp=001/007 Australian Tax Office Information] |
|||
[[Category:Taxation in Australia]] |
[[Category:Taxation in Australia]] |
||
[[Category:Tax avoidance]] |
[[Category:Tax avoidance]] |
||
[[Category:Wages and salaries|Packaging]] |
|||
[[Category:Employee compensation in Australia]] |
|||
Latest revision as of 07:17, 6 January 2025
Salary packaging (also known as salary sacrifice or salary exchange) is the inclusion of employee benefits (also called fringe benefits) in an employee remuneration package in exchange for giving up part of monetary salary. Such arrangements are entered into most commonly if there are tax or other benefits to be derived by the employer or employee from the arrangement.[1]
Salary sacrifice in the United Kingdom
[edit]In the United Kingdom, employee benefits commonly included in salary sacrifice arrangements are pension contributions, childcare vouchers, and annual leave.[2] If correctly structured, the arrangement can benefit both parties as it saves them both NI contributions as well as save the employee income tax.[citation needed]
Salary sacrifice can be extended to any range of benefits and has become increasingly popular in the public sector as well as for transport-related benefits e.g. cycles, bus travel, low CO2 emission cars, and more recently in 2020 vehicle maintenance. Salary sacrifice is also commonly used to fund the introduction of Flexible Benefit Plans in the UK.[citation needed]
Salary packaging in Australia
[edit]Contrary to popular belief, provisions in the FBT (Fringe Benefits Tax) act allow for the employees of private companies to utilise.[3][4]
Items commonly salary packaged include:
- vehicles (either a company car or through a novated lease)
- mobile phones
- laptop computers
Some companies also allow their employees to salary package other items, including household utility bills, although this is complicated and normally requires the assistance of a third-party company who specialise in salary packaging arrangements. Salary packaged benefits in Australia generally attract Fringe Benefits Tax within the Australian taxation system, with a few exceptions - some benefits are Fringe Benefits Tax exempt, including mobile phones and laptop computers if used for work purposes.[citation needed]
Charities and public not for profit hospitals can do this most effectively as they are exempt from fringe benefits tax up to a certain limit per employee (from 1 April 2014 the amounts are $9,010 for Not-for-Profit Public Hospitals and $15,900 for Public Benevolent Institutions). Additional benefits can be packaged above these limits through novated leasing, meals and entertainment or venue hire (holiday accommodation)[5] as well as personal superannuation contributions subject to Concessional Contributions Caps.[6]
The Australian Salary Packaging Industry Association [7] is the professional body for outsourced salary packaging service providers.
The Australian Taxation Office[8] administers Fringe Benefits Tax and the FBT Exemptions that facilitate salary packaging for employees of not-for-profit healthcare organisations and public benevolent institutions.
The long-awaited FBT exemption for electric vehicles passed through the Senate in Dec 2022. This move is part of a broader plan by the Government to increase the adoption rates of EVs in Australia, which are among the lowest in the developed world. The electric car discount policy has allowed employees to salary package an eligible vehicle and save thousands in income tax. [9]
References
[edit]- ^ Clara, Parker. "Salary packaging". Money Smart. Retrieved 22 December 2020.
- ^ HMRC - Salary Sacrifice
- ^ salary packaging benefits
- ^ "Federal Register of Legislation - Australian Government". 15 September 2023.
- ^ Salary Packaging
- ^ Concessional Contributions Caps
- ^ Australian Salary Packaging Industry Association
- ^ Australian Taxation Office
- ^ https://www.easifleet.com.au/blog/ev-novated-lease-best-option/
- ^ "Eziway News". Eziway Salary Packaging. Retrieved 2022-12-22.
- ^ "Treasury Laws Amendment (Electric Car Discount) Bill 2022". www.aph.gov.au. Retrieved 2022-12-22.