Salary packaging involves an employee foregoing a portion of their cash income in exchange for ‘benefits’ provided by their employer. Salary packaged benefits are paid for by your employer using your pre-tax salary income, meaning they do not incur Income Tax but may be subject to a Fringe Benefit Tax (FBT). Some benefits are FBT exempt or subject to a concessional rate of FBT.

Effective salary packaging allows you to create an Income Tax saving that is greater than any applicable FBT incurred. This is achieved through certain FBT concessions and exemptions on particular benefits, or where a Concession Cap exists for Public Health, Charitable or Rebatable employers. Successful salary packaging results in the increase of your Net Disposable Income.

Your employer policy determines the percentage or dollar value of your income that you can nominate towards your salary package. Certain employer types (Rebatable, Charities and Public Health) that are eligible for an FBT Concession Cap will often limit employees to packaging within this Concession Cap limit.

The items that are available for you to salary package will depend on the type of organisation you work for, as well as your employer’s Salary Packaging Policy. Generally employers will allow their staff to salary package any item that may be of benefit to them.

Employers of Rebatable, Charity and Public Health organisations with access to a Concession Cap which allows an FBT concession or exemption will often limit employees to salary package items up to the Concession Cap limit. However, there are several items that are FBT exempt or concessionally-treated for FBT, and can be packaged in addition to these Concession Caps. This includes Exempt or ‘Otherwise Deductible’ benefits as well as Meal Entertainment and Accommodation & Venue Hire. A Novated Lease can also be packaged in addition to a Concession Cap when using the Recipient Contribution Method (RCM).

Visit Benefit Types for more information on the items you can salary package.

The savings and advantages you can achieve through salary packaging will vary according to:

If you include a Novated Lease in your salary package your savings also depend on the purchase price of your vehicle and the annual kilometres travelled each FBT year.

Click here to use our calculator to estimate your personal savings.

We provide a complete salary packaging administration solution for all employer types and their employees for a small yearly fee. Please refer to your employer’s Salary Packaging Handbook for Employees for further details. Salary packaging fees are paid pre-tax, are not subject to Fringe Benefits Tax (FBT), and do not contribute towards your FBT Concession Cap (if applicable).

You must inform Southgate immediately upon terminating your current employment, complete and return to Southgate a Notice of Termination of Salary Packaging Form.

Upon Southgate receiving notice of your employment termination, all your salary packaged benefits will cease. Any remaining funds in your account will be returned to your employer’s Payroll Department, where PAYG tax will be deducted before you receive the final amount

Salary Packaging is completely legal. It is provided by many thousands of employers Australia wide, including to employees of major corporations and most government departments including the Australian Tax Office (ATO). The ATO website, www.ato.gov.au has an extensive archive of salary packaging examples and information on how it works.

Salary packaging is governed by many strict rules and regulations. Our role at Southgate is to manage the day-to-day processing of benefits and educate employees, to ensure that all salary packaged benefits are compliant with all applicable tax laws and current legislation.

We recommend that you always seek independent financial advice before proceeding with a salary packaging arrangement.

Under the law, any business or person that offers or advises you about financial products must either be:

• an Australian Financial Services (AFS) licence holder (often referred to as an AFS licensee), OR
• a director or employee of an AFS licence holder, OR
• an Authorised Representative of an AFS licence holder.

To find an authorised adviser you may wish to visit the Financial Planning Association of Australia (FPA) that represents approximately 12,000 individuals and businesses: http://www.fpa.asn.au/Findaplanner/