Salary packaging is a tax effective way of restructuring your income, enabling you to pay for a range of everyday items out of your pre-tax salary rather than your after-tax salary – leaving more money in your back pocket.
What is Salary Packaging?
Salary Packaging (also known as salary sacrifice) is an arrangement between you and your employer which allows you to pay for some items or services from your salary before tax is taken out.
Normally tax is taken from your salary before you spend it and then you pay all your expenses. With salary packaging, your employer pays you the same salary, but instead of paying all your expenses after you are taxed, you could pay for selected expenses before you are taxed. So you could pay less tax and end up with more spending money.
Who can Salary Package?
Not all employers offer salary packaging (and not all items are able to salary sacrificed with all employers) but if yours does it is important to understand the benefits and costs involved.
What items can be Salary Packaged?
You may be able to salary package items such as super, a car through a novated lease, laptop and make home mortgage or rental repayments.
A quick Salary Packaging Example
Two people earning the same income could end up taking home significantly different amounts.
Without Salary Packaging
With Salary Packaging
An employee salary packaging $9,000 of expenses could end up with as much as $3,240 in additional discretionary income.