What is Salary Packaging?
Salary Packaging, also known as salary sacrifice, is a Tax Office approved way of reducing your Income Tax by paying for items such as motor vehicles, mortgage, or credit cards from your Gross Salary (or pre-tax salary).
By paying for these items with your Gross Salary (or pre-tax salary), you will reduce the amount of your salary that is taxed, resulting in more money in your pocket!
Want more information about salary packaging? View our “What is Salary Packaging Video” on our main salary packaging page and browse through the FAQs.
You can also save on the purchase of your new car. Learn how you can save with the purchase of a new car and a novated lease.
Why Should We Salary Package?
The aim of Salary Packaging is to legitimately pay less tax and take home more pay!
Salary Packaging allows you to pay for items that you have to pay for anyway, but in pre-tax salary. Depending on what you are salary packaging, Fringe Benefits Tax, may or may not apply. The option of having a small fringe benefit provided instead of the equivalent amount of cash salary is an attractive proposition.
Some fringe benefits have a concessional rate of fringe benefits tax applied to them (a rate less than PAYG tax) making them attractive.
There are many benefits to both employers and employees that are gained by salary packaging and by novated leasing of cars. Here are just a few:
- Employees reduce their taxable income - because salary packaging and novated leasing is paid for out of an employee’s gross salary, their taxable income is reduced.
- Employers save on payroll tax - because employees’ taxable income is reduced, so too is their employer’s payroll tax amount - the more employees who salary package their cars, the greater the savings for the employer.