Back to Listing

Why ‘Salary Packaging’ is advantageous?

30 November 2013

What is the gist of ‘advantage salary packaging?

 

‘Salary Packaging’, which is also termed as ‘Salary Sacrifice’ is indeed highly advantageous, and is one of the best available financial options that are presently available for monthly salaried employees, for taking the fullest possible advantages of their monthly salary. Accordingly, by means of this method, all monthly salaried employees can secure funds for procuring valuable items such as brand new vehicles, pricey laptops or notebooks, iPads, tablets, GPRS units, Income Protection Insurance, education, fuel and parking. This financial scheme is officially approved by the ‘Australian Taxation Office’, and in accordance with the set provisions of this pecuniary contract, employees are permitted to enjoy the liberty of ‘tax-free’ expenditure. According to the general code of taxation, the due tax has to be deducted from the actual monthly salary of employees. However, under the scheme of ‘salary packaging’, the amount that is essentially due to the lessor, as the monthly installment, is taken straightway from the pre-tax salary of the concerned employee; this will be indirectly a real ‘tax benefit’ for all employees, as it goes from the ‘pre-tax’ salary. The employer will not have to spend outside the monthly salary of the employees, but at the same time, can help the employees in a highly beneficial manner, which will make the concerned employees more loyal towards the company. This enhanced fidelity level, in fact, will facilitate the diverse types of ‘employee retention’ tasks of the company, to a great extent.    

 

What are the main prerequisites or laid conditions of ‘salary packaging’ ‘?

 

This scheme is a specific type of financial arrangement between an employee and the management of the business establishment, where he or she works. In general, the main prerequisites of this agreement can be summed up as:

·         The agreement must have been mutually agreed (by the employer and the employee), before the actual commencement of the job.

·         The pact can be either in writing, or by word of mouth; in any case, written agreement will be the best form, because, it will serve the purpose of documental evidence.

·         The employee must fully understand that he or she will not have any right on the ‘given up’ portion of the salary, till the expiry of the contract.

·         If the employee gets any extra perk or allowance that is not accounted for the specific ‘salary sacrifice’, then of course, that particular amount will be taxable, in accordance with the prevailing taxation rules.

 

What should the employees do before finalizing an ‘advantage salary packaging’ pact?

The main thing that the employees who are planning to go for the ‘salary package’ scheme will have to take care is that, they will have to find out a professional finance company for the same. Finding a reliable financial company for this distinctive financial scheme is not that much a difficult task these days, because, there is a plethora of such firms out there in the financial market. In recent times it is also possible to get online quotes, and therefore, the concerned employees must always compare and assess the benefits offered by different companies, before grabbing an ‘advantage salary packaging’ offer. 
Share