salary sacrificing

[Traveller]

Can anyone shed a light on what this is please? I've been told I'm eligible, and I'll be working for a public hospital, but I don't really understand it (particularly things like how I can offset my mortgage against my income). I'll get more information from HR in a few weeks but I suspect this will come in the form of a large document with lots of words so if anyone can sum it up for me I would appreciate that

[HotI]

Salary Sacrifice if working for a public hospital is awesome. There is heaps you can salary sacrifice, up to a certain amount of money.

I SS my mortgage, so basically they took out $250 (can't remember exact amount whatever the limit was at that time) from my pay before they calculated the tax. They then deducted the tax amount, and then added the $250 back in. this amount when in my account. You can also have it going int to a seperate account (ie straight to bank) if you want.

[AlligatorsMum]

sorry to hijack but can anyone salary sacrifice if they work full time? does an employer HAVE to offer it? i work for a private specialist?

[LizLemon]

Salary sacrificing is where you pay with things in pre tax dollars. For most people in most jobs the employer has to pay fringe benefits tax on it, so unless it's something that is concessionally taxed (like motor vehicle, carparking etc), and unless they are on the top rate of tax, it's not usually worth it.

But the health system has some concessions and nurses are able to salary sacrifice up to a certain amount without the employer paying FBT on it, so many people pay their mortgage, credit cards etc with pre tax dollars and no FBT is paid. This is sort of an incentive to hospital workers which is effectively a bit of a pay rise without it costing the health system more.

Just be careful though, because while it doesn't affect the amount of tax you pay, it does impact things like some centrelink payments/family tax benefits etc and also repayment of student loans.

Hope that helps!

[Traveller]

do you know if the limit is worked out pro rata for part time employees? I'll only be working 38 hours a fortnight.

[LizLemon]

Alligator's mum yes anyone can technically salary sacrifice but it will not be worth it for everyone - in most cases unless your employer is offering it as a package they will not want to be out of pocket so they will expect you to pay them the FBT they have to pay. So unless as I said above you are on the highest bracket or it is a concessionally treated item it is most likely not worth it.

Your employer doesn't have to offer it but as long as they are not out of pocket they probably wouldn't object.

[nothing2lose]

Trav, I salary sacrifice about $17k of my pay. Be aware it will impact your reportable income (effectively doubling the amount you sacrifice) which can impact CL payments.

It is not pro rata for part time employees in my industry.

[Traveller]

Can you elaborate on how it will affect centrelink? Should I specify to them total income before salary sacrificing or should I break it down into taxed and untaxed income?

[nothing2lose]

Basically your taxable income is different to your reportable income. If your income is $50k and you sacrifice $15k your taxable income is $35k. However, your reportable income is approx $65k (they gross up the sacrificed amount). My understanding is CL use the reportable income figure to work out entitlements for FTB and CC.

HECS also uses the reportable income figure.

[LizLemon]

I'm not sure whether it's prorated or not sorry.

It affects your centrelink because you're getting paid in pre tax dollars (and ie getting the benefit of not paying tax on those dollars) and they need to "gross it up" for the purpose of determining your real income for centrelink purposes.

I'm not actually sure what the process is for notifying centrelink as I don't see that side of it, but they will need to know the full amount of your pay. Your group certificate/payment summary will show the grossed up fringe benefits

[Traveller]

Thanks this is beginning to make sense now

[nothing2lose]

It works for me because I don't get any CL or FAO payments, don't have a HECS debt and don't get child support but some colleagues don't do it because of those reasons. You really need to do your sums to see if it's worthwhile for you.

[LizLemon]

I see a lot of nurses in particular who get caught with the HECs. The employer spruiks the awesomeness of salary sacrificing but doesn't warn them.

[sweetpea678]

Hi,

I've been SS for years, you report to cl your arable and then grossed uped SS, cl then uncross it to a point so it is similar to your normal income without Ss for cl purposes, for Medicare Levi, he's repayments they take your grossed uped amount. Both my husband and I SS as we both have access to it, makes a big difference to our money.

The only other thing is if you pay/get child support they take your grossed up amount.

Hope this helps.

[feeb]

Salary packaging is awesome!! Before i had kids when i was working 4 a week I did my credit card so I stipulated an amount to be taken out fornightly from pay, o sent in a heap of statments showing payments and then the day after pay I got the money back in my account. That come from the set amount max you can do a year for that. I also did a meals and entertainment card so I said how much a fortnight I wanted taken out and they put it straight on this visa meal card they sent me, so we would go out for dinner with friends I would pay on card and everyone would give me money to cover there share.

I am about to start again and do the living expenses card but wont be as great only working 1 day a week at the hospital.

You do want to be careful salary packaging while you have a HECS debt, you can do it but please speak to pay roll and work out how much extra you need to request to pay to HECS so that when you do Tax you actually get your return and not have it all go to HECS.

[Trillian]

Centerlink DOES count it towards your reportable income. Also be careful that you don't cross over into fringe benefits territory because of the tax implications. We had a car salary sacrificed and it was fantastic, but now that they have changed the rules it's not so worth it. It is also only really worth it if you earn over about $60-70k per year - but that was back before the rules changed, so that may not matter so much anymore. This is what centerlink have to say about it;

Reportable fringe benefits for Family Assistance and Child Support (yearly amount)

You need to include fringe benefits (or employer provided benefits) you or your partner gets from your employment such as:

• help to pay your rent or home loan;
• a home phone;
• a car;
• school fees for children;
• your health insurance premiums;
• your child care expenses paid by your employer.

You will find this amount recorded on your Payment Summary (formerly called group certificate) at the end of the financial year. You can ask your employer to tell you the expected amount for the relevant financial year. The amount recorded on a Payment Summary for the financial year ending 30 June (of the current financial year) relates to fringe benefits received between 1 April and 31 March (of the current financial year).

the ato has some info here about it too http://www.ato.gov.au/individuals/co....htm&page=4&H4

[Traveller]

I think I might fire an email off to my accountant and check what's best to do as I already earn an income from the family partnership. Thanks everyone for the help

[Novella]

Be aware that if you have HELP/HECS debt you may end up owing at the end of the financial year if you dont pay extra towards it through out the year. I have had this happen and so have other people I know. Its great though I work part time and pay minimal tax. When renting I SS toeards bills and now I SS towards our mortgage

Also it will be taken into account when you claim family assistance as while SS is not considered part of your taxable income it is counted towards your assessable income for payments

Definitely worth a quick chat with your accountant to make sure you have all your bases covered but I don't know many situations where you wouldnt be better off without it, you just need to make sure you consider all the other implications of it. You can also SS extra super contributions on top of your max SS amount