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Received a brochure in the mail about salary sacrifice, but its not really clear exactly as to what it is or how it works.

Does anyone have an understanding of how it works and whether it is a good thing or not? I only have a very basic understanding of the concept. What are the benefits? What are the negatives?

pafc1870 wrote:Received a brochure in the mail about salary sacrifice, but its not really clear exactly as to what it is or how it works.

Does anyone have an understanding of how it works and whether it is a good thing or not? I only have a very basic understanding of the concept. What are the benefits? What are the negatives?

One of the best perks ever thought of and if you can afford to do it, do it!
What it is simply is that when you get paid a salary, eg $800.00 per week, before tax is deducted you can nominate a figure (say $150.00) to be paid as additional money into your superannuation.
The weekly wage is then only taxable at $650.00.
There are some more lurks and perks but it's best to see a financial advisor to suit your own circumstances but in a nutshell, it saves you paying tax on a part of your income that you might want to put in to somethig like superannuation.
Some companies do it for Medical benefits, whitegoods,vehicles etc for their employees.

I'll vouch for it and I'm lucky we got onboard before they took it away from us as I bought 2 laptops and a car through it.
Got a brand new BF Series 2 XR6 with a few extras for about 32k basically got 10k off as we got it at governement fleet price.
Its a lot cheaper leasing a 32k car than a 42k car and its great never having to worry about petrol, repairs, tyres, etc for 5 years (or whatever period you take a lease).
It is complex though, definately read up on it, your accountant will be able to help you out more but I find most of them useless so really read up on it myself and saw how it could benefit my situation.
Also depending on your super plan/company definately worth looking at salarcy packaging super sometimes.

If you work for a fringe benefits tax-exempt organisation (such as a hospital or charity) then packaging is great because you can get $17,000 of your income effectively coming to you tax free. Problem is that over time cash salaries have been reduced by these organisations to compensate for the tax saving so you may not be automatically better off.

If you work for any other organisation then the main 2 things left that save tax are superannuation (ie, sacrificing salary into your super - can't get until 65) or cars. How much of a benefit the car is to you depends on what tax bracket you are in and how many KMs you do per year. Also depends on how much "value" you place on not having to pay all the bills for running costs. Note most packaging companies charge you a fee for doing this on your behalf.

Also, as Wedgies says, buying cars through a corporate salary packaging system usually means you qualify for fleet discounts not available if you buy it yourself.

Another good one, as someone mentioned, is you can receive about $500 per year tax-free worth of goods your company produces, if it's something you can use. There are some other minor ones but they aren't relevant to most people.

Laptop computers for personal use were a perk that was shut down by the Govt last year.

As personal tax rates have reduced, salary packaging arrangements have become less of a benefit. You are paying less tax to begin with, so less to "save".

Speak to your company's internal expert (if you have one) AND speak to an accountant as Wedgie suggests. Any impact on social security or child support payments needs to be considered.

I package my car and its great, you need to do 25,000 kms per year for it to be worthwhile to get the lower FBT rate

Its fully operational so everything is covered as Wedgie said, something goes wrong you just drop it off and they fix it, pick it up that night and no cost!...best bit of it