If you're salary packaging through your employer, you need to understand what Reportable Fringe Benefits are and how they may affect you at tax time. There will be some math involved, but don’t freak out, we will try and explain how it works as simply as possible.

What you need to know

Your employer is required to keep records of the fringe benefits provided to you throughout the year. If the value of these fringe benefits exceeds $2,000 in a fringe benefits tax year, then your employer is required to report them to the ATO as a RFBA, or Reportable Fringe Benefits Amount.

Your RFBA is also ‘grossed-up’. Grossing up ensures that the amount of tax paid on a fringe benefit is the same as the tax paid if you had received the same amount as a salary taxed at highest marginal rate plus the Medicare Levy. You don’t get taxed separately on an RFBA.

The grossed-up taxable value (GUTV) shows up on your payment summary at the end of the financial year. The below table demonstrates how an employee in the charity industry would calculate their RFBA if they salary packaged the maximum living expenses cap available to them.

Please note that the above is an example only and does not take into account your personal circumstances. We recommend that you seek your own independent financial and tax advice before making a decision regarding entering into (and/or continuing) a salary packaging arrangement.

What to include on your tax return

In your tax return, there will be a section to declare Reportable Fringe Benefits. Simply take the amount from your payment summary and declare it in that section on your return.

HECS / HELP and other government schemes

The benefits you choose to salary package may impact some income-tested government assistance and concessions. For example, the fringe benefits reported on your payment summary may be used to calculate liability for child support or HECS/HELP repayments.

To avoid the probability of getting stung with a bill at tax time, you may wish to speak to your payroll office to put aside more money for HECS/HELP repayments. We recommend that you seek independent financial or tax advice in this regard.

Please note that this article contains general information only and doesn’t take into account your personal circumstances. Seek independent financial or tax advice before making a decision regarding entering into (and/or continuing) a salary packaging arrangement.