Salary packaging is also referred to as “salary sacrificing” or “flexible remuneration planning”.
In essence, salary packaging allows you to structure your existing salary into a combination of take-home pay and a mix of approved benefit-items. Your employer still pays you the same amount, but by remodelling your salary package, you gain greater benefits from your salary.
For example, your salary package could include a car lease. Your employer would pay the lease on your behalf using your pre-tax salary. However, as you are now receiving less cash, you pay less PAYE income tax.
The benefits you can package as part of your salary are dependent upon your field of employment, and the company for which you work.
However, many people are not aware of the broad spectrum of benefits that may be able to be packaged as part of their salary.
For example, you may be able to package:
Salary packaging offers many significant advantages to both employers and employees.
Benefits to employees include:
- the potential to achieve substantial and legitimate taxation savings;
- the reduction or removal of liabilities such as the Superannuation and Medicare Surcharge levies;
- the flexibility to choose a remuneration structure based on your individual needs and preferences;
- the integration of personal financial planning and salary packaging.
Salary packaging is gaining popularity with employers who recognise its potential to attract, recruit and retain high-quality staff. For the same employment cost, employers may be able to offer a higher net benefit to staff than organisations that offer a more traditional salary approach.
Benefits to employers include:
- significantly reducing employment costs such as Payroll Tax and Worker's Compensation;
- increases your franking account, which allows increased tax-paid dividends to shareholders for no additional cash outlay;
- enables you, if required, to provide selected employees with "de-facto" pay rise of up to 50 per cent per annum for no additional cash outlay;
- provides a more competitive remuneration, assisting you in attracting and retaining the best staff;
- allows you to design a more efficient incentive program;
- allows you to communicate Total Employment Costs to employees, beyond simple salary (cash-pay) costs;
- allows your employees to alter their packages to accommodate change, without you incurring additional or unnecessary costs;
- provides for more effective control of remuneration costs;
- allows you to manage human resources’ costs as normal budgeted business expenses;
- is a cost efficient option.
Sound Life & Superannuation Agencies Pty Ltd trading as Sound Life Financial Services are
Corporate Authorised Representatives of Synchronised Business Services Pty Ltd
ABN: 33 007 207 650 trading as SYNCHRON
Principal address: Level 1, 65 Palmerston Crescent, South Melbourne Vic 3051
Australian Financial Services License Number: 243 313