Author Topic: Salary sacrifice and FBT (Aussie)  (Read 1184 times)

stashgrower

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Salary sacrifice and FBT (Aussie)
« on: July 07, 2017, 04:56:22 AM »
Aussie MMMs, I am trying to understand how FBT works. Anyone familiar with this??

* How does it work in practice if I want to salary sacrifice a regular living expense like rent or bills? Does the employer just pay for this directly?

* What is the point of grossed up value? I am confused re what it actually means and why it's done at the highest marginal tax rate and any implications.

Thanks.

(Edited to remove a question.)
« Last Edit: July 07, 2017, 05:19:36 AM by stashgrower »

marty998

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Re: Salary sacrifice and FBT (Aussie)
« Reply #1 on: July 07, 2017, 06:55:37 AM »
Fringe benefits tax was introduced to discourage employers and employees from coming to an arrangement whereby an employee would be paid in non-cash (salary) benefits, which would otherwise escape income tax for the employee.

In order to properly discourage it, the value of the benefit you receive is grossed up to the highest marginal tax rate. You have whats called a "reportable fringe benefits" label on your PAYG Summary which you then include on your tax return.

Ordinarily you can't salary sacrifice rent or bills. Health Service and Charity workers can still to a very limited extent salary sacrifice meal entertainment, but even that is becoming more difficult.

Note I am an accountant but not a tax practitioner (and I am also semi-drunk right now)... perhaps a proper tax expert can provide some better advice...

stashgrower

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Re: Salary sacrifice and FBT (Aussie)
« Reply #2 on: July 08, 2017, 06:11:23 AM »
oh got it now. *Someone* pays tax, and this someone is the employer. I couldn't understand the point of it before.

Yes the higher marginal rate is a good disincentive.

I thought "anything" could be salary sacrificed, but I am not an expert (even if not semi-drunk). I will ask around.

Thanks marty!

cakie

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Re: Salary sacrifice and FBT (Aussie)
« Reply #3 on: July 08, 2017, 06:30:53 PM »


Health Service and Charity workers can still to a very limited extent salary sacrifice meal entertainment, but even that is becoming more difficult.

Actually, if you are in this category (PBIs), you can salary sacrifice anything. Rent, mortgage, bills - inc your CC bill, so basically all expenses :)

And last I checked, unlimited meal expenses, but there are all sorts of restrictions so it's not really worthwhile! At least, not for mustachians who are unlikely to go to fancy restaurants on a regular basis...

stashgrower

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Re: Salary sacrifice and FBT (Aussie)
« Reply #4 on: July 09, 2017, 10:22:24 PM »
Thanks, cakie. That's what I thought based on ATO info. Is there any disadvantage to doing so?

cakie

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Re: Salary sacrifice and FBT (Aussie)
« Reply #5 on: July 10, 2017, 04:18:03 AM »
Just be careful if you are trying to minimise things like hecs repayment or child support (maybe medicare surcharge too?). They "gross up" (double) the salary sacrifice amount in your tax return. Taxable income stays reduced but they use the inflated gross income for certain tests.

Other thing to keep in mind is that the 'year' is april to march, NOT financial year. Bit weird...!

marty998

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Re: Salary sacrifice and FBT (Aussie)
« Reply #6 on: July 10, 2017, 05:34:48 AM »
Most income tax returns are required to be lodged by 31 March of the following year.

The FBT year ends in March so that it spreads the workload for Accountants into what should be a traditionally quieter period.

However... as the accounting profession changes from being simple tax return prepares (reactive) to mostly advisory type roles (proactive)... a lot of that advisory work gets squeezed into June, madly helping clients implement strategies before 30 June.

So the original intent behind asking the government for a different FBT year may need to be looked at again.

stripey

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Re: Salary sacrifice and FBT (Aussie)
« Reply #7 on: July 10, 2017, 06:18:25 AM »
Thanks for the info. I'm new to the whole salary sacrificing thing (I could package relocation expenses for my last job move). Yet another 'new' money thing for this financial year. Each year I think 'this'll be the last year I do my tax return myself' and each time I wind up doing it myself with MyTax, lol

stashgrower

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Re: Salary sacrifice and FBT (Aussie)
« Reply #8 on: July 10, 2017, 07:33:39 AM »
Thanks, cakie. OK I checked the ATO page and HELP and MLS both count the grossed up amount. I didn't check support payments.

JLR

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Re: Salary sacrifice and FBT (Aussie)
« Reply #9 on: July 15, 2017, 06:12:14 PM »


Health Service and Charity workers can still to a very limited extent salary sacrifice meal entertainment, but even that is becoming more difficult.

Actually, if you are in this category (PBIs), you can salary sacrifice anything. Rent, mortgage, bills - inc your CC bill, so basically all expenses :)

And last I checked, unlimited meal expenses, but there are all sorts of restrictions so it's not really worthwhile! At least, not for mustachians who are unlikely to go to fancy restaurants on a regular basis...

It's true. Last time I checked you could salary sacrifice all sorts of things as a Health employee. We currently do our rent, but in the past have done a number of other things.

They seem to be tightening up on Meal Entertainment. I think they may have changed the limits, and seem to be trying to push people on to a fortnightly amount - which then has to be spent by the end of the 'year'. I'm sure you used to be able to roll it over somehow.