Salary Packaging
…how it works?
Salary packaging is often overlooked by employees as a strategy to help reduce tax payable.
When you think about tax minimisation, attention is generally focused on traditional methods such as negative gearing. Our current tax system does not seem to reward the hardest working or those individuals on high incomes. Rather the current tax system can act as a disincentive - generally the more you earn, the greater the tax bill. Salary packaging is an option of legally reducing your tax bill, which is often overlooked. Salary packaging essentially allows employees to take a portion of their salary as benefits from their employer. Depending on which benefit is packaged, there may be Fringe Benefits Tax (FBT) payable, however even with FBT payable it can still have the effect of reducing a client's overall tax bill.
Salary packaging can technically be defined as 'an arrangement under which an employee agrees to forgo part of their remuneration in return for the employer providing benefits of a similar value'.
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