If you’re an employee, you would want to pay less tax, and make your income work harder, correct?
And if you’re an employer, you would want to attract and retain the best staff.
One effective way to achieve both is through salary packaging. But how – and what – you can salary package depends on the rules that govern Fringe Benefits Tax (FBT). If you're interested in understanding the rules, keep reading.
Fringe Benefits Tax (FBT) is separate from your income tax and is payable by your employer for certain non-cash benefits provided to you, such as laptops, phones, cars, etc. Your salary may be reduced by the amount of the FBT payable, as part of your salary packaging arrangement with your employer. The FBT is based on the value of the benefits you receive. Depending on what type of organisation you work for, the FBT rules can affect what types of benefits you can include in your salary package.
You’re in luck! You can salary package items up to $15,900 p.a. without paying any FBT or Pay As You Go (PAYG) Tax. FBT Exempt employers include not-for-profit bodies like charities.
You can salary sacrifice up to $15,900 p.a. without paying any PAYG tax. But you will have to pay FBT. On the plus side, you receive an FBT rebate. This usually reduces your tax bill if you earn over $87,000 each year, as the rebated FBT amount is lower than the applicable PAYG tax rate. Rebatable employers include private schools, testing authorities and sporting clubs.
Full FBT is usually payable on any packaged benefits, apart from certain work-related item such as laptops, mobile phones, airline lounge memberships, and novated leases on vehicles*. Under the FBT rules, a Novated Lease is another way employees can benefit from Salary Packaging. Your employer pays for the lease on your chosen car and maintenance costs out of your salary through a combination of pre-tax and post-tax salary deductions.
It’s important to remember that you don’t need to earn a big income or drive huge amounts of kilometres to benefit from a Novated Lease or Salary Packaging.
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No matter what group your employer falls into, you can package extra payments to your superannuation over and above your compulsory contributions. These extra contributions are made in pre-tax dollars, which helps to reduce your taxable income.
As an employer, FBT can sometimes be a big headache. You need to calculate FBT on the benefits you provide to your employees, work out their liability, and pay the ATO. The alternative is, you could just leave it all to us, the specialists, so you can get back to business.
At Toyota Fleet Management we handle Salary Packaging for more than 350 employers across Australia, taking care of the details and making the process easy from start to finish. If you’d like to offer the benefits of Salary Packaging and Novated Leasing to your employees – while sparing yourself all that FBT hassle – contact us now.
The information provided by Toyota Fleet Management (TFM), a division of Toyota Finance Australia Limited ABN 48 002 435 181, AFSL and Australian Credit Licence 392536, in this article is of a general nature and for your information only. Nothing in this article constitutes or should be considered to constitute legal, taxation or financial advice. Before making a decision about any Salary Packaging arrangement, TFM recommends that you seek independent professional advice about that arrangement, such as from your accountant, taxation or financial adviser or lawyer, who can advise you about your personal circumstances and what would be suitable for you.
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