What is Salary Packaging?

Salary packaging, also referred to as Salary Sacrifice, allows the use of pre-tax dollars towards an item instead of paying for it in after-tax dollars. This is an approved way to tax effectively rearrange your income.

Why Salary Package?

The main reason to salary package is the tax saving associated with it. The pre-tax deduction that is taken out of your pay will lower your assessable income; in turn you will be taxed on a lesser amount – meaning you will be paying less tax.

How does Salary Packaging Work?

Salary packaging is an agreement between yourself and your employer. You may be able to salary package such items as a car, laptop, superannuation, utility bills or rent/mortgage payments. The items you are able to package depend on what your employer offers.

Your employer still pays you the same amount of salary; however you get the benefit of paying for an item in pre-tax dollars, opposed to paying for the item after you have been paid. Here is a diagram to explain how this works –

Les Mumme & Associates can assist you with advice and setting up your salary packaging account with your employer and the company (salary packaging bureau) your employer packages through.