You may be aware that salary packaging is an employee benefit, but do you really understand what it means?

Salary packaging simply provides you with a tax effective method to substitute some of your cash salary for other benefits. So, more of your salary goes into your pocket, rather than to the Australian Tax Office.

Your employer may allow you to salary package items including company cars, mobile phones, car parking, laptop computers and superannuation (super) contributions.

If you decide to package your salary it’s important to understand the implications of Fringe Benefits Tax (FBT) on your packaged benefits. FBT is a tax levied at 48.5% on the non-cash benefits in your package and is paid by your employer. However, your employer may recoup the FBT, by reducing your gross salary. You should note that, in some cases, benefits such as super contributions, laptop computers and mobile phones may be FBT exempt or can be concessionally treated.

Salary sacrificing into superannuation can be a tax effective retirement planning strategy. By making additional super contributions, you benefit from only paying 15% tax on your contributions and on your earnings, rather than paying tax at your marginal rate**. That’s more money you’ll have for your retirement.

To better understand what Salary Packaging can do for you speak to your Financial Adviser.

* Additional Superannuation Surcharges may apply.

** Additional tax may be payable it superannuation benefits are withdrawn as a lump sum.