[et_pb_section fb_built=”1″ custom_padding_last_edited=”on|phone” _builder_version=”4.23″ custom_padding_tablet=”” custom_padding_phone=”0px||||false|false” da_disable_devices=”off|off|off” locked=”off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.23″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_padding=”||0px||false|false” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f3f2f6″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Copy paste body text here” _builder_version=”4.27.6″ header_2_font_size=”32px” hover_enabled=”0″ header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}” sticky_enabled=”0″]Salary sacrifice helps build financial discipline by automatically directing money toward long-term financial goals before it is received as take-home pay.<\/p>\n
As an employer, it’s wise to understand as much as you can about payroll in Australia. Beyond compliance, there’s a slew of options and nuances when it comes to remunerating your employees \u2013 salary sacrifice is one of them.<\/p>\n
A salary sacrifice arrangement is where an employee agrees to give up part of their before-tax salary in return for benefits of similar value. It\u2019s also called salary packaging or total remuneration packaging.<\/p>\n
The sacrificed salary is paid by the employer towards the chosen benefit, which could be extra superannuation contributions<\/a>, car lease payments, or more personal items such as school fees or childcare costs.<\/p>\n The employee agrees to use a portion of their pre-tax dollars to pay for an eligible benefit. The sacrificed amount is deducted from their gross salary before income tax is calculated.<\/p>\n Because salary sacrifice reduces their assessable income, their taxable income is reduced. They pay less tax on their salary, which can increase their after-tax income and take-home pay.<\/p>\n For employers, allowing salary sacrifice can be an attractive addition to an employee benefits package. It could help attract and retain staff<\/a> at no extra cost.<\/p>\n Top tip:<\/strong><\/span><\/em> Be wary of salary sacrifice pitfalls. Common errors with salary sacrifice often include incorrect declarations in payroll tax returns.<\/p>\n [\/et_pb_text][et_pb_image src=”https:\/\/www.reckon.com\/au\/wp-content\/uploads\/2024\/04\/salary-sacrifice.png” alt=”Types of salary sacrifice are extra superannuation, novated lease, electronic devices, and more” title_text=”Salary Sacrifice” align=”center” _builder_version=”4.27.6″ _module_preset=”default” locked=”off” global_colors_info=”{}”][\/et_pb_image][et_pb_text admin_label=”Copy paste body text here” _builder_version=”4.27.6″ header_2_font_size=”32px” header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]<\/p>\n An employee can salary sacrifice for a number of personal benefits and contributions, including:<\/p>\n It lowers the employee\u2019s pre tax salary, which means they pay tax on a smaller amount. The sacrificed amount doesn\u2019t appear as income on their payment summary for income tax purposes.<\/p>\n Say an employee earns a gross salary of $80,000 and sacrifices $5,000 into super. They pay tax on $75,000 instead.<\/p>\n The result? Less income tax on their tax return and a better way to fund personal benefits.<\/p>\n However, the tax benefit depends on the employee\u2019s marginal tax rate and the type of benefit. Always get financial advice or speak with a tax professional to understand the full tax implications.<\/p>\n It depends on the benefit. Super contributions aren\u2019t fringe benefits, so you don\u2019t pay FBT on salary sacrificed super contributions. They\u2019re taxed at 15% inside the complying super fund.<\/p>\n Other benefits like a novated lease, an electronic device or benefits covering personal expenses can be classified as fringe benefits.<\/p>\n The employer will need to pay fringe benefits tax on the taxable value<\/a> of the salary sacrificed amount. Some items qualify as exempt benefits.<\/p>\n Use the ATO\u2019s FBT guides<\/a> or speak with an advisor to learn your obligations before setting up a salary sacrifice arrangement.<\/p>\n Every salary sacrifice arrangement has to be recorded in a written salary sacrifice agreement \u2013 separate from the employment contract.<\/p>\n The agreement should cover what benefits the employee receives, the sacrificed amount each pay period, how long the arrangement will last and more. It must also say that the employee won\u2019t have access to the sacrificed salary.<\/p>\n Hot tip: Only allow salary sacrifice for future pay periods, never for work already done. When hiring new staff, flag the availability of salary packaging in your offer.<\/p>\n For super, the concessional contributions cap is $30,000 every financial year, which includes employer super contributions, salary sacrifice contributions and any personal super contributions claimed as a tax deduction.<\/p>\n If the employee\u2019s total super balance was under $500,000 at the end of the previous financial year, they can carry forward unused concessional cap amounts from up to five prior years.<\/p>\n For non-super benefits, there\u2019s no dollar cap. But the employer needs to know whether they will pay FBT on the taxable value.<\/p>\n Check the specifics on the ATO\u2019s concessional contributions page<\/a>.<\/p>\n Yes. You have to adjust your payroll to include the salary sacrifice work for each employee.<\/p>\n Make sure you update your STP reporting<\/a>, the employee\u2019s payment summary, assessable income and employee contributions.<\/p>\n Use payroll software<\/a> to track the sacrificed amount, employer contributions and any FBT obligations.<\/p>\n Good payroll systems automate all of these calculations so you can pay the right amount and stay compliant all year round.<\/p>\n For employees, salary sacrifice can mean less tax on income, higher super balances and personal benefits at a lower cost. It\u2019s very tax effective for people on higher marginal tax rates.<\/p>\n That being said, a lower salary could impact government benefits, loan repayments and how much the employee can borrow. Always get independent financial advice before entering any arrangement.<\/p>\n For employers, the main cost is admin. You need a written agreement, adjusted payroll and FBT management. Despite this, it could be a low-cost way to improve employee retention.<\/p>\n Speak to an advisor<\/a> and read up on salary sacrificing for employees<\/a> to get started.<\/p>\n [\/et_pb_text][ba_social_share icon_bg=”#03002e” icon_padding=”10px|12px|10px|12px|true|true” layout=”classic” show_text=”off” btn_padding=”0px|0px|0px|0px|false|false” btn_bg_color=”RGBA(255,255,255,0)” _builder_version=”4.23″ _module_preset=”default” custom_margin=”50px||||false|false” custom_padding=”25px||||false|false” custom_css_before=” content: %22SHARE THIS%22;|| font-size: 16px;|| font-weight: 700;|| line-height: 22px;|| letter-spacing: 0em;|| text-align: center;|| color: #ff5447;|| margin-bottom: 10px;|| display: inline-flex;|| position: absolute;|| margin-top: 10px;” border_width_top_main=”1px” border_color_top_main=”#e4e4e4″ border_radii_icon=”on|5px|5px|5px|5px” global_colors_info=”{}” custom_css_before_last_edited=”off|desktop”][ba_social_share_child _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”facebook” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”linkedin” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”email” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][\/ba_social_share][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":" Salary sacrifice helps build financial discipline by automatically directing money toward long-term financial goals before it is received as take-home pay. As an employer, it’s wise to understand as much as you can about payroll in Australia. Beyond compliance, there’s a slew of options and nuances when it comes to remunerating your employees \u2013 salary […]<\/p>\n","protected":false},"author":35,"featured_media":272835,"menu_order":0,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"","footnotes":""},"sbh_category":[192],"class_list":["post-280319","sbh","type-sbh","status-publish","format-standard","has-post-thumbnail","hentry","sbh_category-payroll-guide"],"yoast_head":"\nHow does salary sacrifice work?<\/h2>\n
For what reasons can an employee salary sacrifice?<\/h2>\n
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How does salary sacrifice affect income tax?<\/h2>\n
Does salary sacrifice trigger fringe benefits tax?<\/h2>\n
How do you create an effective salary sacrifice agreement?<\/h2>\n
How much can an employee salary sacrifice per year?<\/h2>\n
Does salary sacrifice affect payroll?<\/h2>\n
What are the key considerations of salary sacrifice?<\/h2>\n