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Salary Packaging for Centacare Employees
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 offer. F:\HR\GENERAL\RECRUITMENT\GENERAL PACKAGE\Salary Packaging for Centacare Employees.doc Page 1 of 2 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 direct 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 day. 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 Advantage Total take home $ 980 Total $1,106.30 extra pay is $126.30 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). F:\HR\GENERAL\RECRUITMENT\GENERAL PACKAGE\Salary Packaging for Centacare Employees.doc Page 2 of 2
"Salary Packaging for Centacare Employees"