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Salary Packaging

Employers  Employees
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Salary Packaging as a Remuneration Solution

Salary Packaging as a Remuneration Solution is also considered as a salary sacrifice arrangement. It is a formal arrangement between an employer and an employee, if the employee agrees to receive a lower amount of pay each payday in return for the employer providing them with benefits of a similar value to the reduction in pay.

Effective salary sacrifice

The requirements for an effective salary sacrifice arrangement are:

If a fringe benefit that has not been provided is cashed out at the end of a salary sacrifice arrangement accounting period, the amount cashed out is treated as salary and is taxed as normal income.

Salary and wages, leave entitlements, bonuses or commissions that accrued before the arrangement was entered into cannot be part of an effective salary sacrifice arrangement.

You cannot include payments you have direct debited from your pay, such as health insurance premiums, loan repayments, union fees or credit card repayments. These payments are made from after-tax or net amounts of salary.

There is no restriction on the types of benefits that can be sacrificed. The important thing is that the benefits form part of your remuneration, replacing what would otherwise be paid as salary.

Salary sacrifice may affect super and some government benefits

It’s important to understand the potential implications of entering into a salary sacrifice arrangement with your employer. The following may apply to you:

The Fair Work Commission regulates employment agreements and conditions. To check your conditions contact the Fair Work Commission.

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