Salary Sacrifice Agreements
Often, employers use a fictitious level of wages to calculate employers` and workers` pension contributions, so that workers who participate in wage sacrifice agreements are not disadvantaged. Example: Suppose a person earns $100,000 a year and wants to buy a new car for work worth $US 22,000. If they had entered into a pay waiver agreement with their employer, the $22,000 for the car would be deducted from their taxable income. As a result, they end up in the lower tax class with an income of $78,000 and a tax-exempt car. Some staff members commit to making a regular donation to non-profit organizations of their choice through an employment donation program. This agreement is not a wage sacrifice agreement, since the ATO requires that the normal gross salary be indicated in the employee`s payment statement. Payroll tax must be paid on the normal gross salary. Beth`s salary is $65,000 a year. She negotiates a salary sacrifice agreement for a $3,000 laptop that will be made available for work.
Beth`s new salary is reduced to $62,000 per year. The laptop is with the exception of FBT. Therefore, payroll tax must be paid on the $62,000 salary. The purpose of payroll packaging is to allow an employee to combine income and benefits in a tax-efficient manner. Super-contributions sacrificed as part of an effective agreement on employee victims are considered employer contributions. These are not ancillary benefits if they are paid for an employee to a compliant superfund. The key to tax sacrifices lies in the fact that the worker takes part of his remuneration in the form of discounted benefits, instead of taking everything like a fully exploitable salary. This procedure is called a “pay victim” because the employee sacrifices part of his salary in return for the desired benefits. It is of course possible to pay pension contributions through a salary sacrifice scheme. . . .