Salary Packaging

At this stage you might be thinking, what is salary packaging?

Salary Packaging is the term used to explain the process of buying goods and services out of your salary before tax is paid on these earnings.  What this means is that your taxable income will be reduced by the amount you have salary packaged.  For example, you are earning $1000 a week gross (before tax) and you salary package a car with payments of $200 per week.  You would only pay tax on the difference, in this example, you would pay tax on $800 as opposed to $1000.

This means that you will be able to make large savings on items that can be salary packaged.

Often in Australia you will become subject to fringe benefits tax which is a tax applied by the Australian Tax Office.  Although some things you are able to purchase are exempt from having to pay Fringe Benefits Tax.

Salary Packaging can provide tax effective solutions in order to help you buy cars, laptops, groceries, home mortgage repayments and many more things from your pre-tax earnings.  This can be a considerable saving, especially if you are in a high marginal tax rate.

Over the past ten years we have seen a huge growth in the number of people looking to salary sacrifice into their superannuation.  Salary sacrificed contributions can very quickly add up to tens of thousands of extra dollars at retirement through the effect of compound interest on the higher retained funds from the tax savings.

By effectively salary packaging it allows employees to reduce their annual tax bill to pay for every day goods and services at zero risk to your employer.  With all of your payments coming out before you pay tax on your salary.

To find out more information about Salary Packaging or for a review of your current financial position please contact our office to speak with an expert financial adviser today.