Save Tax By Salary Sacrifice

You can save income Tax by sacrificing your Salary (Salary sacrifice)

Salary sacrifice is an arrangement whereby you forego part of your salary or wages in return for your employer providing benefits of a similar value.

One example of a salary sacrifice arrangement is to have some of your salary or wages paid into your super fund instead of to you. You can save more than 40% of Income tax (higher tax slab earners)

If you make super contributions through a salary sacrifice agreement, these contributions are taxed in the super fund at a maximum rate of 15%. Generally, this tax rate is less than your marginal tax rate.

The sacrificed component of your total salary package is not counted as assessable income for tax purposes. This means that it is not subject to pay as you go (PAYG) withholding tax.
Thus you save over 40% of your Income Tax (higher salary earners)

For more information on Etax, myTax ATO, myGov and online tax return, please contact us at 1300 768 284 or you can email us at enquiry@taxrefundonspot.com.au

Salary Sacrifice

A salary sacrifice arrangement is also commonly referred to as salary packaging or total remuneration packaging. It is an arrangement between an employer and an employee, where the employee agrees to forego part of their future entitlement to salary or wages in return for the employer providing them with benefits of a similar cost (to the employer). The employee is likely to place greater value on the benefit than its cost to the employer.

The salary sacrifice arrangements for not-for-profit organizations are the same as for businesses.

An effective salary sacrifice arrangement will detail the amount of salary or wage income to be sacrificed, and it must be entered into before the employee becomes entitled to be paid and before any work is performed.

Under an effective arrangement, all of the following apply:

  • the employee pays income tax on the summary salary or wages
  • the employer may be liable to pay fringe benefits tax (FBT) on the fringe benefits provided
  • salary sacrificed superannuation contributions are classified as employer super contributions – not employee contributions – this means they are taxed in the super fund under tax laws trade specifically with this subject
  • the employer may be required to report certain benefits on the employees’ payment summary.

For more information on Etax, myTax ATO and online tax return, please contact us at 1300768284 or you can email us at enquiry@taxrefundonspot.com.au