Catholic Education Centre 116 George Street Thebarton SA 5031 PO Box 179 Torrensville Plaza South Australia 5031 Telephone: (08) 8301 6600 Facsimile: (08) 8301 6611 ISD: 61 8 8301 6600 Email: email@example.com www.ceo.adl.catholic.edu.au __________________________________________________________________________________________________________________________________________ Salary Sacrifice Laptop Computers for School Employees Introduction The SA Catholic Schools Enterprise Agreement 2001 provides for employees under this agreement to salary sacrifice for FBT –Free items. Specifically, the agreement provides that salary sacrifice arrangements can be established for the purchase of laptop computers, palm pilots, software or professional subscriptions. The total amount assigned for salary sacrifice cannot exceed 40% of the gross total remuneration of an employee. In establishing provisions for salary sacrifice for laptops, palm pilots, software and professional subscriptions, it is recognised that a school may bear a cash flow disadvantage arising from such purchases. For example, employees arranging salary sacrifice for laptops may require the school to purchase the laptop at the commencement of the salary sacrifice agreement, with the employee’s contribution towards the purchase cost being spread over three years. For palm pilots and professional subscriptions, the cash flow impact for the school exists, but it is somewhat lessened due to both the lower costs and the limited repayment periods for these options. For laptops, the costs and repayment periods, hence cash flow impact is greater, so to assist with this the CEO will provide funds to schools, via a loan facility, to fund these purchases if required. This arrangement will be cost neutral to the school and CEO. School Procedures 1. Each employee who wishes to salary sacrifice for a laptop computer needs to complete an Agreement to Salary Sacrifice for FBT-free Item(s) (available on CESA Online) and have it authorised by the School Leader. Note the following: 2. Laptops must be used for work related purposes 3. Only one laptop per FBT year can be sacrificed, and full payment of the laptop must be made before another can be purchased. 4. Repayment terms range between 6 and 36 months. 5. Once authorised, the school can proceed to purchase the item (or reimburse the staff member if they have already purchased the item). The school can claim the GST on the purchase if appropriate documentation is held. Note the following: 6. The employee is the owner of the item 7. It is the employee’s responsibility to insure the laptop, and 8. The employee is responsible for the repayment of the entire amount of the purchase price plus interest costs, even in the event that the article is lost/stolen and insurance is insufficient to meet this cost. -2- 9. The school then sets up a new chart of account at 4016 sub account for the employee, and the purchase is applied to this account. 10. The school should then elect how they wish to fund the purchase. They have two options: 11. Apply for a loan through the CEO, or 12. Fund through the schools cash flow. 13. Regardless of how the laptop is funded, the school must apply a loan rate of the current CDF interest rate. Loan from CEO 1. In the first instance, the school should request reimbursement for the GST exclusive cost of the item to be repaid to the school. To do this, the school should complete an Application for Reimbursement for Laptop Computer application form available on CESA Online for each laptop purchased and forward it to CEO Finance. 2. The CEO will then reimburse the school for the cost of the item within 7 days of receiving a correct and completed application. The CEO will also advise the school of the fortnightly repayments to be deducted from the employee’s gross salary. The deductions will include an interest component based on the current CDF loan interest rate. The reimbursement should be credited to the employees 4016 account. The salary deductions should be debited to the salary expense account for the employee, and credited to the 4016 chart of account set up for the employee. 3. The school will then be required to forward the deductions, either fortnightly or monthly, to the CEO 1129 S2.1 bank account. This can occur as an EFT payment or by setting up a periodic payment with the CDF. The repayment is debited to the 4016 chart of account set up for the employee, which will ensure that the account will clear at the end of each month. 4. The school must also complete the laptop remittance template, which details the employee name, CEO debtor number, payment details and number of fortnightly payments and forward to CEO Finance at the time each payment is made. It is the school’s responsibility to advise the CEO if the employee transfers to another school and also to advise the new school of the repayment amounts and where the repayments are up to. If an employee should resign, the school is responsible for ensuring the final salary deduction is made. Advice should be sought from the CEO Finance Team to confirm final amounts due. 5. If the loan interest rates change, the CEO will notify the school of the new rate. The school is then responsible for applying the new rate and updating salary deductions accordingly. 6. The CEO will forward quarterly statements to the school advising of the current balance outstanding. These statements must then be passed on to the relevant employees. Funded from cash flow 1. If the school chooses to fund the purchase using their own cash flow resources, they must charge interest at the current loan rate to the employee. The repayment is simply calculated by applying the current interest rate to the -3- GST exclusive purchase price, and dividing it by the number of payments to be made within the requested repayment period. 2. The interest component should be debited to the employees 4016 account and credited to a sub account of 0590-Other Recurrent Sundries income, via an accounts payable journal. 3. The salary deductions should be debited to the salary expense account for the employee, and credited to the 4016 chart of account set up for the employee. 4. The clearing account will maintain a running balance of the total amount the school is owed, and will reduce to zero once all the repayments have been made. 5. If the employee transfers to another school during the repayment period, the new school should reimburse the old school for the amount remaining in the clearing account, and the new school will then adopt the above process.