Salary Packaging for Centacare Employees by lindayy


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									                                     Salary Packaging for CatholicCare
                       Permanent Part Time & Full Time Employees
The taxation legislation provides significant tax concessions for not-for-profit
organisations, including CatholicCare Wollongong (“CatholicCare”). One such
concession is an exemption from Fringe Benefits Tax (FBT). This means that
CatholicCare can pay/reimburse an employee’s personal expenses (up to $16,050 per
year) without the payment of any tax. This tax-free amount is in addition to your
normal tax free threshold for salary ($6,000 pa.).

When you salary package, money is deducted from your salary prior to tax being taken
out (ie. the deduction is made ‘pre-tax’). You only pay tax on the remaining portion of
your cash salary (ie. the amount paid by payroll), not the salary package money. See
the example next page. As a result, the tax deducted from your pay is significantly
reduced. The tax saved each fortnight is a permanent tax saving – refer to discussion
on “Payment Summary” as to what happens when you do your tax return. You are
never taxed on the salary package money.

There is a limit on how much you can salary package. The salary packaging limit is set
by the Tax Office at $16,050 per fringe benefit year. The fringe benefit year is 1 April to
31 March.

The example over the page will help you to see the benefits that salary packaging can

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How Does Salary Packaging Work ?
Judy earns $30,480 per year. She has a fortnightly mortgage payment of $400 and
fortnightly school fees of $100. She also has health insurance payments of $300 per
month. Judy earns $30,480 per year. Judy may salary package all of these items and
wishes to salary package the maximum of $16,050 per year.

Judy’s annual expenses look like this:                                                                   Advantage will:

Mortgage                               $ 400 x 26                              = $10,400                 fully reimburse or pay
School Fees                            $ 100 x 26                              = $ 2,600                 fully reimburse
Health Insurance                       $ 300 x 12                              = $ 3,600                 part reimburse
                                       Total expenses                             $16,600

To salary package the maximum amount, Judy needs to show evidence that she has at
least $16,050 in expenses annually. Judy’s expenses easily exceed this amount.
Remember, Judy pays all these expenses herself, and merely provides evidence to
Advantage (i.e. a photocopy) that these expenses exist. The salary packaging money
is a reimbursement of expenses and is paid into Judy’s bank account as part of her
normal pay.

To get started, Advantage will total the value of expenses provided by Judy (up to a
max. of $16,050), calculate the fortnightly value of the expenses (e.g. $16,050 / 26 pays
= $617.30), and this is the amount Judy salary packages. Let’s see what happens pay

What Happens Pay Day ?
                                       Before                                                            After

Wages (gross)                          $1,172                                            Wages (gross) $ 1,172         unchanged

                                                                               Less:     Salary Package (617.30)       ($16,050/26)
             pre tax
                                                                                         Admin Fee       ( 10.00)
             pre tax

Wages – taxed                          $1,172                                            Wages - taxed   $ 544.70

Tax                                    ($ 192)                                           Tax             ($ 55.70)

Wages (net)                            $ 980                                             Wages (net)    $ 489.00           1. paid Payroll
                                                                                         Salary Package $ 617.30           2. paid
Total take home                        $ 980                                             Total           $1,106.30         extra pay is

As a result of salary packaging, Judy will now receive two payments each fortnight.
The salary packaging money is paid into a bank account nominated by Judy (normally
savings account). Once the two payments are added, this is Judy’s new take-home pay
(up $126 a fortnight extra).

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