What items can I salary package in Australia?
You can salary package various items, including novated leases for cars, additional superannuation contributions, and work-related expenses like laptops. Eligibility often depends on your employer's offerings and sometimes the type of organisation.
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How it works in practice
Understanding Salary Packaging
Salary packaging, also known as salary sacrificing, is an arrangement between you and your employer where you agree to forgo a portion of your pre-tax salary in return for a benefit of similar value. The primary goal is to reduce your taxable income, as the cost of the benefit is deducted before income tax is calculated.
Common Items for Salary Packaging
Many common items can be salary packaged, depending on your employer's policy and the nature of the benefit. Popular options include novated leases for vehicles, which cover car repayments and running costs directly from your pre-tax pay. Contributing additional amounts to your superannuation fund is another common strategy, boosting your retirement savings more tax-effectively. Work-related expenses, such as professional memberships, laptops, or home office costs, can also often be included. For employees of specific FBT-exempt organisations, like public hospitals or charities, a broader range of benefits may be available, such as meal entertainment, mortgage repayments, or remote area housing.
Tax Implications
While salary packaging reduces your taxable income, many benefits are subject to Fringe Benefits Tax (FBT), which your employer pays. Some employers may pass on this cost to you, while others absorb it. Understanding these tax implications is crucial to determine if salary packaging is financially beneficial for your individual circumstances.
Important exceptions
Not all employers offer salary packaging, as it is a voluntary arrangement. Some benefits, particularly those like meal entertainment or remote area housing, are often only available to employees of specific FBT-exempt organisations, such as public benevolent institutions or health services.
Fringe Benefits Tax (FBT) can apply to many packaged items, which may reduce the overall tax benefit if your employer passes on the cost to you. Salary packaging can also affect your Adjusted Taxable Income (ATI), potentially impacting eligibility for government benefits like Centrelink payments or HECS/HELP repayment thresholds. Careful record-keeping is essential.
What you should do now
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Check if your employer offers salary packaging and review their specific policy and eligible benefits.
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Identify which eligible items or services align with your personal financial goals and needs.
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Understand the tax implications, including any Fringe Benefits Tax (FBT) costs or impacts on your Adjusted Taxable Income (ATI).
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Consult a financial advisor or your payroll department for personalised advice on the potential savings and costs.
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Formally apply for salary packaging through your employer's approved process, ensuring all documentation is completed accurately.
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