What is Salary Packaging?

Most people receive their salary and wages in the form of cash. Salary Packaging involves foregoing some of your cash income to receive benefits provided by your employer. Depending on your employer, some of these benefits may include Superannuation, Laptop Computers, Motor Vehicle (including all operating expenses), mortgage payments etc. These benefits are called Fringe Benefits and in some cases they are subject to Fringe Benefits Tax (FBT). The purpose of salary packaging is to provide you with a financial benefit by way of an income tax saving, that exceeds any resultant FBT liability (if any).


Is Salary Packaging legal?

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). You can even visit the ATO website that contains a large volume of information about Salary Packaging. The website even includes an example of the potential benefits of salary packaging.


Who decides what I can salary package?

Your employer determines the items that are available for you to salary package. Generally employers will allow their staff to salary package any item that may be of benefit to them.


How much can I save?

The tax savings available to you are affected by many variables including your employer FBT classification, your income and the types of benefits you choose to package. If you include a novated lease the savings also depend significantly on the purchase price of your vehicle and the annual kilometers travelled each FBT year.


What is FBT?

Fringe Benefits Tax (FBT) is a tax on the value of a benefit provided in respect of employment. The terms benefit and fringe benefit have broad meanings for FBT purposes and can include any right, privilege, service or facility. Fringe benefits are provided in respect of employment, and may even include a former or future employee.


What items are exempt from FBT?

Laptop Computers
Personal Digital Assistants
Superannuation
Meal Entertainment (PBI Hospital & PBI Charity Only)
Motor Vehicle running costs (fuel, servicing, tyres etc) whilst packaging a novated lease


What period is the FBT Year?

The FBT year is 1st April - 31st March. Any Reportable FBT incurred during this period will be are reported on your employee income statement at the end of the income tax year.


What is a novated lease?

A Novated Lease is a 3-way arrangement between the employee, the employer and the financier where the obligations under the finance lease are transferred from the employee to the employer through a Deed of Novation, and the employer assumes responsibility for making the lease payments to the financier.


What method of calculating Motor Vehicle FBT does Southgate use?

Southgate uses the Statutory Formula to calculate FBT. This is a commonly used formula for calculating Fringe Benefits Tax where there is not a significant amount of business related travel. The statutory % used depends on the number of kilometres travelled in each FBT year. The more kilometres you travel the less FBT you pay, as displayed in the following table:

Statutory Formula Table
Annual Kilometres Travelled	Statutory Percentage (%)
0-14,999	26%
15,000-24,999	20%
25,000-40,000	11%
40,001+	7%

What is the Recipient Contribution Method (RCM)?

This is a method of using the employees post tax income to make payments towards their salary packaged novated lease. The purpose of this is to remove the FBT payable by contributing towards the taxable value of the motor vehicle. This method will provide additional salary packaging benefit for most employees, except those on the top marginal tax bracket and those who work for rebatable employers.


How can I communicate the benefits of packaging to employees?

Southgate can assist you in communicating the benefits by providing:
Employee Presentations
Posters (for placement in tea rooms etc)
Payroll Inserts
Packaging content on your intranet



Where can I obtain financial advice?

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/
Alternatively, the following advisers services have been used by our customers in the past:


Steven Mandalidis

Ph: 02 9299 4066
Mob: 0404 459 528
Fax: 02 9299 8422
Email: steven.mandalidis@ampfp.com.au
Level 4, 95 Pitt St, Sydney NSW 2000
PO Box Q1198, Sydney NSW 1230
ABN 61 296 138 247