One of the questions we are most frequently asked is “What Can I Salary Package” and happily, the answer is most of your daily expenditures. This does depend on the tax status of your employer. Salary packaging is designed to help you save money when paying bills and expenses, and allows you to enjoy more of your after-tax income.
While there are caps and limitations, the best way to understand how much you can salary package is to talk to your employer or salary packaging provider.
What are the five most common things that are salary packaged?
Irrespective of your employer’s tax status, you can Salary Package a car by having a novated lease, whether it is for a new, demo or used car (even if you currently own one). The lease is an agreement between you, your employer and a selected finance company to cover the repayments and costs of running the car with pre-tax income.
It is a win-win for employees and employers because your lease payments are based on the GST exclusive price of the car. Also, any GST paid on the car running costs during your novated lease is able to be claimed by your employer and credited back to your lease account. They are also hassle-free finance arrangements as most of the paperwork is completed by your nominated salary packaging company and employer.
Super is one of the first things employees consider with salary packaging. It can boost your retirement fund with pre-tax income and you pay less tax on your take-home pay. The only applicable tax is the 15% contributions tax, payable by your Super fund, as it is considered another employer contribution.
In addition, you may be able to receive 12.5% super contributions in your after-tax salary but these contributions may be slightly less because your taxable income has decreased. This program is designed to be particularly beneficial for first home buyers as you can access your super early to buy your first home and the more you have in super, the greater your borrowing capacity is.
3. Meals and Entertainment
If you enjoy nights out, nice dinners at restaurants and holidays, you’ll love salary packaging. Depending on your employer’s tax status, you can claim up to $2650 each Fringe Benefits Tax (FBT) year for meals, entertainment and travel.
There are two ways you can claim meals and entertainment:
- Using a Salary Packaging Meal and Entertainment Card that is preloaded with funds.
- Manually claiming it from your salary packaging provider using itemised receipts and tax invoices.
This process applies to every legitimate salary packaging provider, so we recommend making the most out of this benefit.
4. Remote Area Housing Benefits
If you are lucky enough to live and work in one of Australia’s remote areas, you may be entitled to some benefits that those who live and/or work in capital cities and large towns are not.
Some of the things you can salary package include 50% of your mortgage interest or 50% of your private rent, 50% of your fuel costs (Gas, Electricity, Firewood, etc.), relocation expenses, travel expenses to and from a capital city in Australia and property purchase expenses.
Your salary packaging provider should be able to provide you with all the relevant information on this topic.
5. Your Mortgage, Personal Loans or Credit Cards
If you have access to salary packaging and depending on your employer’s tax status, you can choose to use it towards your mortgage or personal loans or credit card repayments.
There are many benefits in choosing to pay your loans with salary packaging. You may be able to afford higher repayment amounts and therefore reduce the loan term. This alone could save you lots of interest. To learn more about salary packaging your mortgage, check out our article.
Please remember that with all Salary Packaging arrangements, before you proceed you should obtain your own financial advice independent of your salary packaging provider.
How do I get started with Salary Packaging?
If you are considering salary packaging or want to know more about how it works, feel free to call us here at The Salary Packaging People and speak with one of our friendly team members on 03 5229 4200 or send us a message online.