Independent Payroll Services

Salary packaging is also termed as Salary sacrificing. Salary packaging is an effective way of lowering taxable income. It is an ATO approved way for enhancing the amount of disposable income. There are two reasons which should compel you to choose Salary Sacrificing option:

• You have to pay less tax
• You can enjoy more money in your pockets by paying expenses

There are different tools which can be exercised for effective Salary packaging through Independent Payroll Services (IPS). They are:

• Novated Car leasing: Packaging a car through Novated leasing option is an effective way of reducing tax by agreeing to forego a part of your salary for maintaining car and some part of the salary can be deducted as pre-tax payment. You should opt for Novated Lease as:
• It is a benefit offered by the employer other than an increase in wages.
•  Novated lease agreement is a three party agreement between you, your employer and      Novated Lease Company. This allows your car to be treated as a company car which would normally provide income tax and GST savings to you.
• You would have the option of purchasing a new car or an old car, and also you would have the option of selling or leasing back the car.

Exemptions to Fringe Benefit Tax (FBT): FBT is a tax levied on some non-cash elements furnished by the employee during the term of employment. However, IPS provides a list of items which are exempted of FBT and can be salary sacrificed.

• A portable electronic device generally in the form of mobile phones, laptops, PDA etc.
• A computer software item
• A protective clothing item
• Briefcase
• Any approved tool of trade

Super contributions: The mandatory super contribution is 9.5% in the FY 2014-15. However, you can opt to contribute additional super up and above the mandatory contribution. The additional contribution to your chosen Super fund is commonly termed as Salary Sacrifice. The additional super contribution or the sacrificed component of your salary is not assessed and is excluded from tax calculations. So, it does not increase the PAYG tax. Thus, making additional super contribution in an effective tool for increasing savings and lowering the tax.

You can also enrich yourselves to know more about our tools for free salary packaging services by visiting our website www.ipspayroll.com.au (The services generating tax for employer are excluded)

In simple terms, Salary packaging is an Australian Tax Office approved way of restructuring your income. By opting for Salary Packaging you can buy goods and services or pay personal expenses and costs from before tax income rather than after tax income – resulting in tax benefits and better income!

Why Salary package?

This is an effective and Australian Taxation Office (ATO) compliant arrangement that gives more buying power to you as you are restoring the tax dollars that would otherwise be withheld from your pay and paid to the ATO for the government.

Salary Packaging Options –

There are a list of items that can be salary sacrificed however as a PAYG contractor the benefits you can claim without generating any tax liabilities for your employer are as follows :

Fringe Benefit Tax – Exemptions pertaining to work related items

A number of benefits are exempt from fringe benefits tax (FBT) under the FBT legislation. Providing certain work-related items to an employee is one of these exemptions. The following work-related items commonly provided in salary sacrifice arrangements are FBT-exempt benefits:

• a portable electronic device (Examples of portable electronic devices include a mobile phone, calculator, personal digital assistant, laptop, portable printer and portable global positioning system (GPS) navigation receiver)
• an item of computer software
• an item of protective clothing
• a briefcase
• a tool of trade.

Superannuation

Making additional contributions towards your Super fund is an effective way of proliferating your take home income. Often termed  as Salary Sacrifice, this is a convenient way to boost your savings and enjoy tax benefits. This can be done through your employer by increasing the percentage of super contributions to anything above the statutory limit of 9.5%

These additional contributions also referred to as ‘before tax contributions’ are taxed at a rate of 15  percent by Super Fund companies. This tax rate is reasonably profitable since it is much less than standard tax you would have paid otherwise.

Novated Car lease

A novated lease is a form of salary packaging, where your employer provides you with a benefit other than a cash salary or wages. A three party agreement is made between you, your employer and novated lease company, whereby you enter into a finance lease with novated lease company and a second document called a novation agreement is used to transfer some of the lease obligations to your employer.

This allows your car to be treated like a company car for tax purposes, which can provide you with significant income tax and GST savings. (Ref from NLC)

Living Away From Home Allowance

For FBT purposes, a LAFHA is an allowance paid by an employer to an employee to compensate for additional expenses incurred and any disadvantages suffered because the employee’s duties of employment require them to live away from their normal residence.

The term ‘additional expenses’ does not include expenses the employee would be entitled to claim as an income tax deduction. (ATO)

Interested in salary packaging free of cost? You can get more details on our website www.ipspayroll.com.au where as a contractor you are entitled to free of cost salary packaging services (The services generating tax for employer are excluded)