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Salary Packaging - CAP (PBI, Not for Profit, Charitable)

What is Salary Packaging your Expenses (CAP)?

Salary Packaging is a way of restructuring your income to reduce the amount of tax that you pay.

Approved by the Australian Tax Office (ATO), Salary Packaging means you can pay expenses up to a specified amount, (eligible expenses listed below) out of your salary before you pay tax.

The ability to Salary Package expenses is a benefit that may be offered by eligible employers to their staff.

 

What are the Benefits of Salary Packaging your CAP?

Depending upon your employer, you may be able to salary package the following items:

  • Home Loan & Rent – Home Loan repayments & residential rentals
  • Personal Loans – Personal, car or debt consolidation Loans
  • Aged Care – Aged and disabled care payments for parents, partners or dependants that need nursing care because of old age or physical or mental disability
  • Child Care – Child care costs
  • Computer items – Portable electronic devices, software, computers
  • Education – Professional memberships and subscriptions, newspapers, magazines, self-education, some educational courses, courses materials and related excursions
  • Financial Advice – Fees paid for financial advice (FBT Exempt)
  • Holidays – Accommodation, Flights, Transfers, Travel Insurance (Food excluded)
  • Insurance – House, Contents, Trauma, Life, Private health cover & Income protection
  • Memberships – Memberships to clubs and associations, including fitness centres
  • Private School Fees – Compulsory private school fees incurred for schools (excludes building levies)
  • Rates – Council, water & sewerage
  • Travel – Fares, accommodation, Public transport costs, parking fees
  • Utilities – Electricity, gas, telephone, body corporate, internet

 

How does Salary Packaging work?

A carefully calculated amount, based on the benefits you are entitled to, is deducted from your taxable income and moved to a trust account (managed by an Administrator). The tax you pay is then assessed on your reduced taxable income after the deduction, lowering the tax you pay.

You initially pay for the expenses up front and are then reimbursed for your selected Salary Packaging items using the funds from your Salary Packaging account.

Here is an example:

Jane, Jack and Anna are all on the same income but are employed by different companies.

Jane is unable to salary package however Jack and Anna can, but as they don’t work for the same company they have access to different benefits and Salary Packaging amounts.

Particulars Jane Jack
(PBI)
Anna
(Charitable)
Gross Income $55,000 $55,000 $55,000
Less Salary Packaged Expenses (eg: Rent) $9,000 $16,000
Taxable Income $55,000 $46,000 $39,000
Income Tax $9,442 $6,497 $4,222
Medicare Levy $1,100 $920 $463
Net Pay (per Annum) $44,458 $38,583 $34,315
Minus Expenses (eg Rent) $16,000 $7,000
Net Disposable Income (per Annum) $28,458 $31,583 $34,315
Net Disposable Income (Fortnightly) $1,094 $1,214 $1,319

 

As you can see from the example above, Jack has saved himself $3,125 and Anna has saved herself $5,857 over the year.

If your work is based within a Hospital or your employer is a Not-for-Profit or Charitable Organisation, then you may be eligible to package your expenses.

Book an appointment with us to discuss your situation, see if you can salary package through your employer and identify what benefits you can access.

There are also additional benefits for those that are able to access these entitlements in the form of Salary Packaging vehicle expenses.

 

How can we help you?

Contact us today to organise an initial appointment with a Salary Packaging specialist. The specialist can provide a free financial assessment and evaluate the impact on your individual circumstances.

We provide a holistic service and can assist you in all areas of your financial life. Please click here for a full list of our services.

 

Find out about a Novated Lease.

Find out about an Associate Lease.

 

 

© 2017, John Hehir, Financial Advisers Australia

© 2017, John Hehir, Financial Advisers Australia
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