Salary Packaging Procedure
Section 4. Legislative impact on salary packaging
Salary packaging arrangement is a complex area of remuneration management and the University must comply with the requirements of the Australian Taxation Office ("ATO"), relevant State and Federal taxation legislation and regulations associated with salary packaging. For a salary packaging arrangement to be effective it must comply with the requirements of the ATO, and the University policy and procedures have been established to ensure compliance.
Fringe Benefits Tax (FBT)
It should be noted that, with the exception of motor vehicles, all of the benefits which may be salary packaged by University staff are exempt from fringe benefits tax and as such these benefits will have a 'nil' taxable value for FBT purposes.
Unlike hospitals and charitable organisations, Monash University is not exempt from FBT and is therefore restricted in the range of benefits that can be offered without attracting FBT liability for the University or the staff member.
FBT Reporting on Payment Summaries
Fringe benefits provided to staff (whether or not salary packaged) are required to be reported on a staff member's Payment Summary where the aggregate taxable value of fringe benefits provided exceeds $2,000 per FBT year. The grossed-up value (i.e. multiplied by 1.9417) will be required to be shown on a staff member's Payment Summary whilst this amount will not be taxable to the staff member, it will be taken into account for the purposes of determining the application of certain surcharges, levies and Government entitlements such as, the additional Medicare levy etc.
Goods and Services Tax (GST)
The key impact of GST on University staff who salary package is that the University will generally be entitled to claim a GST input tax credit in respect of benefits which are salary packaged. In this regard, the amount which a staff member is required to salary sacrifice in respect of a particular benefit will in most cases be the GST-exclusive value of that benefit. Further information is provided throughout this Salary Packaging Procedure in relation to each of the benefits which may be salary packaged.
Superannuation Industry Superannuation Act
Concessional Superannuation Contributions
Concessional contributions are superannuation contributions made from pre-tax income and include employer contributions, pre-tax member and additional voluntary salary sacrifice contributions. These contributions are taxed at 15 per cent when received by a complying superannuation fund.
From 1 July 2007, with the implementation of the Government's Simpler Super arrangement, a limit on the amount of concessional contributions that can be made by an individual has been introduced. Concessional contributions to superannuation will be limited to $50,000 per person per annum. These contributions will be taxed at 15 per cent. A transitional period will apply.
During the transitional period, the cap on concessional contributions will be $100,000 for those 50 years of age and over. The transitional period is from 1 July 2007 to 30 June 2012. A person who turns 50 during that period will be able to use the transitional arrangements.
Where a person's concessional contributions exceed $50,000 (or their transitional cap) in a financial year, the excess will be effectively taxed at the top marginal rate plus Medicare levy. This tax will be applied to the individual, not their superannuation fund. A person will be able to ask their fund to release monies to pay the tax.
Australian Taxation Office Requirements
Staff responsibility with tax compliance
Staff cannot claim a tax deduction on any benefits that are packaged (other than depreciation for the business portion of the cost of computers and mobile phones).
All staff are required to observe all standards regarding salary packaging. The standards are set by the Australian Taxation Office (ATO) and require complete proof of expenditure and adherence to the staff member's nominated flexible remuneration. Failure to observe the standards can result in ATO penalties
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