Salary Packaging Home Loan Payments

[Ol School Skata]

I am eligible to salary sacrifice my home loan payments with my employer, being in a remote location.

I don't understand how this could be a saving...see below

say i earn $70K - current tax payable per annum is approx $17400 per annum including medicare levy, leaving a net salary of approx $52600.

My employer wil let me salary sacrifice my home loan payments up to $25K per annum. There is Fringe Benefits Tax to pay on this however. I am lead to believe this rate of tax on the $25000 is approx 43% or higher. This means i would pay approx $10750 in FBT as well as a $280 employer salary sacrifice fee, rather than $7875 Income Tax.

Is this correct?

Everyone at work raves about it but i am having trouble seeing the net benefit

Hope a more learned friend can show me how this works

OSS

 

[buzzlightyear]

Would also be interested in hearing an answer to this.

http://www.somersoft.com/forums/showthread.php?t=31484&highlight=salary+packaging

 

[Pushka]

Well, if you have to pay Fringe Benefits then I cant see how it is of value. The only benefits to SS is when your employer is a Benevolent Institution then no FBT required.

 

[Ol School Skata]

i have been playing with a salary packaging website our employer uses

https://www.msa-online.com.au/CalculatorSP.asp

Using the calculator has shown the following (Full FBT Payable Employer)

Income $70K
Income Tax Payable inc ML $17400
Net Salary p.a $52600
Less Loan payments $25000
Net position is $27600 after loan payment

With a $25K salary sacrifice toward home purchase

Gross Salary $70000
Less FBT $10864
Less loan payments $25000
Less Sal Sac Fee $280
Income Tax Payable $6015
Net Wage $33856
Net Position $27841

The FBT is deducted from the Gross Salary before income tax is calculated.

For this position it is only a $241 pa difference. So for this to really make a difference person would really need to be in a higher tax bracket $75K pa or higher

Interesting...

OSS

 

[Mr. Fabulous]

So for this to really make a difference person would really need to be in a higher tax bracket $75K pa or higher

Interesting...

OSS

Well, you're not far off it, just go and ask the boss for a raise.

Mark

 

[Ol School Skata]

Well, you're not far off it, just go and ask the boss for a raise.

Mark

This was for one of my staff....don't encourage them do do that!

OSS

 

[Norwester]

OSS,

In respect of your first post, if you are an employee you are not liable to pay FBT. The FBT is payed by your employer.

The total amount of payable FBT is however included on your group certificate for purposes of calculating Family Assistance payments and other types of government handouts and levies..............

Your salary sacrificing is most likely carried out through a specialist provider. You should perhaps check with them..............(eg RTIO uses MacMillan Shakespeare in Melbourne)

ciao

Nor

 

[aef]

OSS,

In respect of your first post, if you are an employee you are not liable to pay FBT. The FBT is payed by your employer.

True - in my experience however most employers recover the FBT from their employees.

Regards
a

 

[aef]

Well, if you have to pay Fringe Benefits then I cant see how it is of value. The only benefits to SS is when your employer is a Benevolent Institution then no FBT required.

This is true. Re-location costs such as stamp duty on new purchase are also FBT exempt (subject to certain rules). See http://www.ato.gov.au/businesses/content.asp?doc=/content/52017.htm&page=26&H26

I am curious as to why the employer sets a limit if they are not a PBI.

In any case you have given me an idea that I am going to work the numbers on. Especially since the FBT rate has reduced compared to the top marginal rate.

Regards
A

 

[Pushka]

And there is no way, as a small Business owner, I would pick up the FBT for an employee!

 

[Norwester]

Exactly why I would never work for a small business................even though I ran one quite succesfully myself.........

ciao

Nor

 

[Pushka]

Norwester, just running this past you because our Accountant has advised not to do FBT (even for us Directors!) because it creates a significant amount of additional paperwork - the employer gets the benefit of having to pay less tax, the employer still has to pay the salary amount that they would normally pay to the person into their nominated account, (salary plus the tax that would normally have been paid) and then you say that employers should have to pay FBT as well? Isnt that kind of expecting business to partly 'double pay' the tax that employees would normally pay?

 

[thedude]

Well, if you have to pay Fringe Benefits then I cant see how it is of value. The only benefits to SS is when your employer is a Benevolent Institution then no FBT required.

Hit the nail on the head.

 

[Mry]

For this position it is only a $241 pa difference. So for this to really make a difference person would really need to be in a higher tax bracket $75K pa or higher

That doesn't sound right OSS.

I show a loss of $7,009 if you salary package a $25,000 private loan repayment on a straight $75,000 salary for a full FBT paying employer. And thats what I would expect since fringe benefits tax gets you paying tax on the benefit at the highest rate possible for Full FBT paying employers.

Pushka and thedude have it right. Most employees for full FBT paying employers should be looking for exempt benefits (laptop, mobile phones) or doing some tricks (car statutory formula method) to get benefits.

 

[Ol School Skata]

That doesn't sound right OSS.

I show a loss of $7,009 if you salary package a $25,000 private loan repayment on a straight $75,000 salary for a full FBT paying employer. And thats what I would expect since fringe benefits tax gets you paying tax on the benefit at the highest rate possible for Full FBT paying employers.

Pushka and thedude have it right. Most employees for full FBT paying employers should be looking for exempt benefits (laptop, mobile phones) or doing some tricks (car statutory formula method) to get benefits.

have you used the calculator i stated above. The option we have been told to use for the FB item is the last one from the drop down menu.

OSS

 

[Mry]

I actually did use the calculator, but I missed the word 'remote' from your first post. I am onboard now.

Sounds like a lot of trouble to get the advantage, but it is still an advantage.

 

[Eee]

this is very interesting. I have read a bit about this in Dale's two books/manuals.

What I am wondering is how is remote defined?