Salary packaging could be the smart way to maximise your disposable income.

It could help reduce your taxable income, with very little effort on your part. So why aren’t more people doing it?

Often they simply think it sounds more complicated than it really is.

We’re here to demystify the process, and help you take advantage of salary packaging’s many benefits.

How does salary packaging work?

In a salary packaging arrangement, you pay for selected expenses from your pre-tax salary, which could increase your disposable income. The remainder of your salary is taxed as normal.

How does salary packaging make a difference?

Let’s see how salary packaging could leave more money in your pocket with the following example:

• Susie earns $60,000 per year. She works for a charitable organisation, and her employer provides a program which allows her to salary package everyday items up to a cap of $15,900 per FBT year.
• She takes advantage of the full amount of these benefits by salary packaging $15,900 (for things such as her groceries, utility bills, child care and a new laptop).
• This $15,900 is taken out of her pre-tax salary.
• This could leave her up to $4,857 better off each FBT year.

That’s a huge saving for simply paying out of her pre-tax income for things she’d be paying for anyway!

To find out how much you could save by salary packaging, try out this salary packaging calculator.

What can you include in salary packaging?

There are a range of items that are eligible for salary packaging, depending on your industry and your employer’s salary packaging policies. They could range from additional superannuation contributions to rent or mortgage payments, general living expenses to financial advice, and home office expenses to professional memberships.

You can see a list of eligible benefits you can sacrifice here.

What are the rules related to salary packaging?

The rules around salary packaging are determined by the ATO.

Employee’s responsibility

The ATO specifies that it’s the employee’s responsibility to ensure the proposed salary package is aligned with the requirements associated with the ATO’s rulings and guidelines.

Prospective arrangements

Any salary packaging arrangement has to be prospective. In other words, the arrangement made should be for future payments expected from the employer and cannot be applied to any payments already received.

For example, any accrued annual leave which you may be entitled to is a result of your past employment history, and therefore cannot be part of your salary packaging agreement.

Salary packaging deed

One of the procedures required when entering a salary packaging arrangement with an employer is for the employee to complete a Salary Packaging Deed. This is similar to a consent form where the employee acknowledges and accepts responsibility for their conscious decision to enter into salary packaging arrangements with their employer.

This is nothing to be concerned about – it’s simply used to protect the ATO from any liabilities incurred in the process of allowing salary packaging.

Ready to get started?

If you’re ready to get going on setting up your salary packaging arrangement, Maxxia has the expertise to help make the process simple. Fill out our online enquiry form today learn more.

Assumptions: The estimated potential tax benefit is based on the assumption that an eligible employee salary packages the specified amount. FBT rates effective 1 July 2023 and PAYG tax rates effective 1 July 2024 have been used. An average salary packaging administration fee has been used. The actual administration fee that applies to you may vary depending on your employer. Tax, benefit & Medicare Levy calculations are approximate, and assume no other taxable income is received. HELP repayments and taxation surcharges are excluded. Important information: This general information doesn’t take your personal circumstances into account. Please consider whether this information is right for you before making a decision and seek professional independent tax or financial advice. Conditions and fees apply, along with credit assessment criteria for lease and loan products. The availability of benefits is subject to your employer’s approval. Maxxia may receive commissions in connection with its services. Maxxia Pty Ltd | ABN 39 082 449 036.