Salary sacrificing services

Because at Online 89 we know that our contractors and consultants want to get the maximum benefit from their contract income, Online 89 offers payroll management services that include full salary packaging services.

Salary packaging is an arrangement whereby an employee, with the approval of the employer, agrees to take their salary as a combination of cash and non-cash benefits.   This results in the employee paying income tax on the reduced salary or wages.  Items salary packaged are not able to be claimed as a tax deduction in the employee’s personal tax return.

The following items may be included in your salary package:

Salary sacrificed superannuation

You may choose to forego part of your salary in return for your employer paying extra superannuation.  Salary sacrificed superannuation contributions are considered to be employer contributions which, when paid for an employee to a complying superannuation fund, are not fringe benefits.  They are, however, reported on your payment summary as reportable employer super contributions.

Salary sacrificed superannuation is in addition to compulsory employer superannuation guarantee (currently 10.5%) payments.

Motor vehicle and associated operating costs

Novated leases: You may package a motor vehicle via a novated lease.  A novated lease is a three-way agreement between an employer, employee and the financier, under which the employee leases a vehicle from the financier, and the employer agrees to take on the employee’s obligations under the lease.  Normally, the employer then makes the lease payments on behalf of the employee, and deducts them from the employee’s pre-tax income (known as salary packaging a vehicle).  If the employee ceases to be employed by that employer, or the lease agreement ends, the employee retains the vehicle but all obligations assumed by the employer under the novation agreement revert back to the employee.

There are two main types of novated leases:

    1. Finance only lease – provides only finance. (Associated operating costs may be packaged separately through Online 89).
    2. Fully maintained lease – includes motor vehicle operating costs in addition to the finance costs.

Operating costs may include repairs (but not smash repair expenses met by an insurance company or another person legally responsible for the damage to the car), maintenance, fuel and oil, insurance, and registration.

Fringe Benefit Tax: When an employer provides an employee with a benefit as part of their employment, the benefit may be subject to Fringe Benefits Tax (FBT).  Online 89 utilises the Employee Contribution Method to reduce FBT taxable value and the associated FBT liability.

The Employee Contribution Method allows employees to make post tax contributions towards the cost of their motor vehicle.

The following method is used to calculate your employee contribution:

Employee contribution = [Motor vehicle price less on-road costs] x [Statutory percentage=20%] x [Number of days available for use in the FBT year / 365].

Online 89 strongly recommends seeking independent financial advice prior to entering into a motor vehicle salary packaging arrangement.

Laptop / PDA tablet / mobile phone

A portable electronic device is a device that:

      • is easily portable and designed for use away from an office environment
      • is small and light
      • can operate without an external power supply
      • is designed as a complete unit.

Portable electronic devices include:

      • mobile phones
      • calculators
      • personal digital assistants (PDAs)
      • laptop computers
      • portable printers
      • portable global positioning system (GPS) navigation receivers

To package a portable electronic device the portable electronic device must for work related purposes.  You must be able to substantiate this use and will be required to validate this use by way of a signed declaration.

A valid tax invoice will need to be supplied for the packaging to take place.

Mobile phone expenses

You may claim the cost of using your mobile phone as long as the use has been work-related.  You will be required to validate this use by way of a signed declaration.

A valid tax invoice will need to be supplied for the packaging to take place.

Self-education, training courses, seminars

Self-education expenses, that the employee would normally be able to claim via their income tax return, can be packaged.  To claim the cost of self education you must satisfy one of the following criteria:

    1. At the time the expense was incurred, there was a direct connection between the self-education and your current work activities that enabled you to maintain or improve the skill(s) or specific knowledge upon which your income earning activities are based.
    2. There is a direct connection between the self-education and your current work activities because you can show that the study leads to, or is likely to lead to, increased income from your current work activities.
    3. Other circumstances exist where there is a direct connection between your self-education and your current work activities.

A valid tax invoice will need to be supplied for the reimbursement to take place.

Membership to airport lounge clubs

You may package the cost of using your airport lounge club membership as long as the membership will be used primarily during work-related travel.  You will be required to validate this use by way of a signed declaration.

A valid tax invoice will need to be supplied for the reimbursement to take place.

Work related expenses

A valid tax invoice will need to be supplied for the packaging to take place. The item’s use must primarily be for work-related purposes.

Professional expenses

Professional expenses that the employee would normally be able to claim via their income tax return can be packaged. These include memberships of professional bodies and associations, as well as subscriptions to journals and publications.

A valid tax invoice will need to be supplied for the packaging to take place.

Domestic travel allowances

A domestic travel allowance is an allowance paid by an employer to an employee to cover losses or outgoings that are incurred when the employee travels away from their ordinary residence in the course of their duties.  Travel allowance is paid for accommodation, food, drink or incidental expenses related to the travel.

Travel allowance is only payable when the employee sleeps away from home.

A domestic travel allowance does not cover air, bus, train, tram and taxi fares.  These expenses may be claimed as a reimbursement in addition to a travel allowance.  Any claims for reimbursement must be supported by an appropriate tax invoice and accompanied by a declaration that the expense is directly business related and it has not been covered by a travel allowance.

Further information on domestic travel allowances and reimbursements can be obtained from Online 89.  To claim domestic travel allowances and travel reimbursements employees will be required to complete a claim and declaration form.  Travel reimbursements will need to be accompanied by the appropriate tax invoices.

International travel allowances

An overseas travel allowance is paid by an employer to an employee for meals and/or incidental expenses related to overseas travel undertaken in the course of the employee’s duties.  Reimbursement of overseas accommodation expenses are payable upon production of receipts or other documentary evidence.  You may also claim reimbursement for airfares.  Any claims for reimbursement must be supported by appropriate tax invoices, and relevant boarding pass/es.

Where a trip is undertaken partly for private purposes, the expenses will need to be apportioned.

The employee is required to maintain a travel record.  A travel record is a record of activities undertaken during travel.  This travel record should be retained for a period of five years.

Further information on overseas travel allowances and reimbursements can be obtained from Online 89.  In order to claim overseas travel allowances and travel reimbursements employees will be required to complete a claim and declaration form.

Online 89 recommends seeking independent financial advice prior to entering into any salary sacrifice arrangement.