Salary Sacrifice (also known Salary packaging) is an arrangement between you and your employer where you pay for services or items directly from your pre-tax salary. When used correctly salary sacrifice can significantly reduce your taxable income and put more money in your pocket or increase your retirement nest egg.
Providing your employer is willing to offer facility everyone on a salary can salary sacrifice however it’s important that you seek advice to determine your specific circumstances to understand if it's beneficial.
There is no restriction on what can be salary packaged however the benefits of salary sacrifice fall into three categories: superannuation, fringe benefits and exempt benefits.
Redirecting some of your pre-tax income into super is a great way to improve your prospects of a comfortable retirement. These additional contributions will be taxed within the super fund at a rate of 15%. However, there is a limit at to the total amount of money you can pay into your super each year.
Typically, an employer is required to pay fringe benefits tax on the value of benefits they provide to each employee, in excess of $2,000 per year. However Non-profit organisations are allowed certain fringe benefits tax exemptions depending on the category of the organisation. This means not-for-profits can provide benefits to employees, which makes salary packaging very attractive to their employees.
Contact us for a free over the phone consultation and professional advice and see if salary sacrificing is right for you: