lurk jollification: Salary Packaging Explained

As we progress in our careers we have to understand and discover new and unique ways of making the most of our salaries. Simply defined, salary packaging refers to the inclusion of specific fringe benefits in an employee?s payment package. Salary packaging is a way in which we can work with the tax office whilst getting the extras we want like cars and child care costs and superannuation.

What?s the difference between salary packaging and salary sacrificing

In terms of the results and the tools involved salary packaging and salary sacrificing are the same thing. Strictly speaking salary packaging refers to the articles you are packaging with your ordinary salary. In this same sense salary sacrifice amounts simply refer to the amounts, taken from your salary pre-tax, which contributes to the payments for these items.

How can I use it to get a new car?

You can salary package a new car or used car. Yes, at times there can be guidelines about the age of the used car however these are quite flexible. The process is usually managed by a novated lease provider. The choice of novated lease provider is usually down to your human resources department however this can vary from company to company. Before setting up your novated lease the best advice is to look into the available tools to assess suitability. The best tools for this is either a salary packaging calculator or a novated lease calculator. A salary packaging schedule which you will get from your novated lease company may also help you understand the savings and costs involved in the process.

How does it work with your paycheque

For more simple items the payments are simply taken out on a monthly basis. For these items, like superannuation, the monthly amounts are easily understood from the outset. Salary packaging with a vehicle can be marginally more complex however the savings are more substantial. All approved salary packaging amounts are taken from the employees pre-tax salary. This is at the very heart of why salary packaging is so appealing. With novated leasing, which is salary packaging for vehicles, there are two forms. Fully managed is where all vehicle costs are taken pre-tax. Unmanaged is where only finance and very few other costs are taken from your salary pre-tax.

Conclusion

With more and more information about tax becoming available online everyone is becoming more and more sensible about their own setup. Many people are now taking advantage of the incentives available within the tax system. However some are still not making the most of their tax deductable opportunities. In the end the best advice is to always remain aware of your position and how you can spot more opportunities. On the other side, if you don?t already make the most of your tax options you need to get active.