Ever wondered why some people seem to get many benefits in their job that normal people just don’t get. We all know that government workers can salary sacrifice to a multitude of different things without being penalised, pay less tax and get more in the hand.
Did you know that there are ways of having your cake and eating it too?
Salary Sacrificing can be used by anybody employed as a salary and wage earner – you just have to ask for it, and if your employer will not lose out from giving it to you then isn’t it a win-win scenario!!!
An “effective” salary sacrifice means that your employer pays your expense of choice from your gross before tax salary, instead of you paying for it with your after-tax income. Therefore, you are saving on the amount of tax you pay as you are only taxed on your salary less the expense and you are getting more cash in your bank account in comparison to what you would have had paying the expense yourself.
The easiest expenses to get your employer to agree to are ones that cost them nothing extra so have to be used solely for work purposes, such as the following:
- Portable electronic devices e.g. laptop computer, mobile phone, portable printer and GPS navigation receiver
- Computer software
- Protective clothing
- Tools of the trade
- Briefcases
- Taxi travel if the travel is a single trip beginning or ending at the employee’s place of work
- Income Protection Insurance
- Financial/Taxation advice
- Professional Memberships and subscriptions
- Any work expense that would be wholly deductible in your personal tax return
- Superannuation (up to your concessional cap of $30,000 < aged 49, $35,000 > 49 (2015/2016)). Note, normal super guarantee is part of this cap amount so you can only salary sacrifice your cap less the super guarantee already paid.
- The employer needs to show that the item offered is solely for work-related use. Remember, you cannot claim these amounts as an expense on your tax return as you didn’t pay it yourself
Other salary sacrifice items you may wish to discuss may attract Fringe Benefits Tax and obligations that your employer may not wish to pay. These include:
- Any private portion of the work expense as above
- Motor Vehicles used for work purposes
- Property including goods, real property and shares
- Expense Payments – loan repayments and school fees.
You could agree to contribute to the expense e.g. If you contribute to the operating costs of the car, such as fuel, that you are not reimbursed for reduces the FBT attracting taxable value for your employer. Your employer could simply ask you to pay the FBT tax which depending on the choice of reportable fringe benefit and your salary figure, could be more than it would cost to pay from your own funds being at a rate of 49%.
There are many options available to you to get benefits and salary sacrificing can add some perks to your normal salary. Get the right information before you chat to your employer so you can put forward an informed proposal.