What to do at tax time – Salary Packaging.

Its tax time

What does this mean for you and your salary packaging?

In most cases there’s nothing you’ll need to do at tax time in relation to your salary packaging, but you may notice some items on your income statement. In this article we’ll explain what these are.

If you have a salary packaging arrangement in place, your taxable income does not include your salary packaging payments, and therefore neither does it include the savings you’ve achieved through salary packaging.

Some salary packaging payments are however reportable on your income statement.

Reportable Fringe Benefit Amount.

If you work for an FBT-exempt employer such as a public hospital or charity, or if you have a novated lease on an FBT-exempt electric / plug-in hybrid vehicle, you will most likely have a Reportable Fringe Benefit Amount (RFBA).

An RFBA is based on the total value of benefits paid to you under a salary packaging arrangement whereby the payment was subject to an annual ‘cap’ (for example $9,010 or $15,900, or $2,650 for Meal Entertainment/Venue Hire).

You are not taxed on your RFBA. It Is included in income tests for some government benefits and obligations.

Employers are required to “gross up” the value that you have salary packaged. The reason for this is to report the value of the funds as if the money was paid to you after tax, meaning you had to have earned the higher value to reach a wage payment equal to the value salary packaged.

For example, $17,000 would have had to be earned to be paid $9,010 as a taxed wage, and therefore if your capped amount is $9,010, your RFBA amount will show as $17,000. To ‘gross up’ your annual capped amount, it is multiplied by 1.8868. Grossed-up values for common salary packaging cap amounts are as follows:

$9,010 x 1.8868 = $17,000
$15,900 x 1.8868 = $30,000
$2,650 x 1.8868 = $5,000

It is important to note that not all salary packaging payments will result in a RFBA – only those that fall within your threshold ‘capped amount’.

Superannuation.

If you have salary packaged into your super fund, this is also reportable and shown as Reportable Employer Superannuation Contributions.

Again, salary packaged superannuation payments are not taxed but may be used in calculating certain entitlements.

Income Statements and Reporting.

If you have an RFBA, this will be reported by your employer and shown on your income statement available via ATO online services through MyGov.

You will be required to advise your RFBA to certain government departments such as Centrelink and Department of Human Services as this may impact certain entitlements such as:

  • Centrelink payments
  • Child Support payments
  • Education debts such as HECS/HELP

If you have a Novated Lease, see our page on tax time information.

The information provided is of a general nature. It is not financial or taxation advice. Paywise strongly recommends that you seek professional advice in relation to your salary packaging and taxation affairs.