The 1 April salary packaging trap
March 2015
Preventative measures
The Government increased the Fringe Benefits Tax (FBT) rate from 47% to 49% from April 1 2015, an attempt to prevent high-income earners planning around the debt tax.
How will the FBT rate change affect you?
In general, the FBT rate change will make providing employee benefits more expensive and potentially less attractive over the next few years.
For employees
Changes to income and fringe benefits tax over the years have made salary packaging less effective in general and in some scenarios, you might be worse off.
Employers
For employers, you need to review all salary packaging arrangements and any expenses where you have a large FBT exposure.
The FBT rate change will generally not affect not-for-profit entities and other tax exempt entities because the annual maximum value of the capped FBT exemption has also gone up – so employees of these entities should be no worse off than before the FBT rate change.
Family tax benefits and other Government payments
If you receive family tax benefits or other assistance payments from the Government, it's essential to review salary packaging arrangements as the changes may have a direct impact on any benefits you receive.
Get a professional perspective on salary packaging
Salary packaging can be complex however more than anything else, you want to be able to prepare for the impact of the Government's changes. A review by your accountant will reveal how the changes are likely to hit your hip pocket.
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Disclaimer
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.
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