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Remuneration and Benefits Procedure - Salary Packaging
Title of Parent Policy
Remuneration and Benefits Policy
The University recognises the importance of offering flexible remuneration planning to staff. Salary packaging (also referred to as salary sacrificing) is one way to provide staff with the flexibility to request a combination of cash salary and benefits to suit their individual and personal needs, and to increase their disposable income.
The purpose of this procedure is to provide key information regarding salary packaging benefits and applications to staff.
This procedure applies to the University's continuing and fixed term staff. Casual and sessional staff are eligible to salary package superannuation only. This procedure applies to Australian campuses only.
ATO: is the Australian Taxation Office.
Benefits: is any non-cash benefit and cash payment (other than salary) made (or expected to be made) for the benefit of the staff member and cash payment made (or expected to be made) to the staff member by way of reimbursement of expenses incurred by the staff member.
Fringe Benefits Tax (FBT): is tax payable by the University to the Commonwealth Government on some categories of benefits provided to staff members.
FBT Year: runs from 1 April to 31 March.
Gross salary: is salary before tax.
PAYG: is 'Pay As You Go' income tax.
Remuneration: means salary plus benefits.
Salary: is payment for time worked that is paid by way of regular periodic cash payments and subject to PAYG tax.
Salary Packaging: refers to any arrangements made by the University to provide benefits in lieu of salary payments. For example, salary packaging that provides for the purchase of a notebook/laptop computer or similar device may be available.
Salary Packaging Commencement Date: is the effective date that the staff member's request for salary packaging commences.
Staff: is a person employed by the University and eligible to apply for salary packaging.
Taxable Income: is the income that an employer is required to withhold tax from.
1. How salary packaging works
Under a salary packaging arrangement staff can request for the University to provide certain benefits (as outlined in this procedure).
The University will pay for these benefits on behalf of the staff member or reimburse the cost of them, instead of providing gross salary with PAYG tax deducted. In return, the staff member will agree to 'sacrifice' or forego the cost to the University of providing the benefit.
Employer provided benefits which are provided as an alternative form of remuneration (i.e. by way of fringe benefits) are not assessable under the PAYG system, thus may provide a tax advantage for the staff member.
Salary packaging will not change the staff member's gross salary or their terms and conditions of employment.
A staff member's pre-packaged gross salary will continue to be used to determine calculations for the following entitlements:
Packages will commence from the beginning of the next available pay period.
At present, the University offers benefits to staff that are either FBT exempt items or motor vehicles, which are concessionally taxed.
Benefits that staff claim as an income tax deduction when preparing an annual income tax return are not available for salary packaging (with some noted exceptions).
2. Financial advice
Care has been taken to ensure the accuracy of the information contained in this procedure, however it is not the intention to provide comprehensive information with respect to salary packaging. Individual circumstances vary and thus affect the benefits or otherwise of participating in salary packaging arrangements. Accordingly, the University strongly urges all staff planning to participate in the salary packaging process to seek independent financial planning advice. No person should rely on the contents of this procedure without first obtaining such advice.
The University is not responsible for the results of action taken on the basis of information contained herein nor for any error or omission in this publication and hereby expressly disclaims all and any liability and responsibility to any reader of this procedure in respect of anything done or omitted to be done (or the consequences thereof) by any person in reliance upon the whole or any part of the information contained in this site.
3. Items available for salary packaging
The University will deduct a flat rate administration fee of $4.35 from a staff member's gross salary per fortnight in order to salary package the following standard benefits:
The University will decide the salary and benefits available to staff and may vary benefits available, and review and adjust the associated administration fee at any time.
Continuing and fixed term staff on contracts greater than 12 months are eligible to salary package the items listed in the table below. The University may allow staff with contracts of less than 12 months to salary package, depending on the items requested to be packaged.
Casual and sessional staff covered by an enterprise agreement are eligible to salary package voluntary superannuation contributions as outlined in the table below.
4. Changing or terminating the package
Staff may elect to cease packaging at any time.
The salary packaging year runs from the 1 April to 31 March, consistent with the FBT year.
If a staff member leaves the University during a year in which he/she has salary packaged, the staff member's entitlement to receive benefits stops and their package is ruled off and reconciled at the termination date.
The University will off-set monies owing against any salary, leave and other remuneration that may be due and payable to a staff member at the termination date. The University reserves the right to take legal action to recover all monies owing by staff members or former staff members of the University.
Where packaging involves a third party, such as child care centres, NLC and Monash Sport, Monash HR payroll may require written advice from the provider in addition to written advice from the staff member to cease salary packaging arrangements.
5. Legislative impact on salary packaging
Salary packaging arrangements are a complex area of remuneration management and the University must comply with the requirements of the ATO, relevant State and Federal taxation legislation and regulations associated with salary packaging. To ensure effective compliance with these bodies, the University policy and procedures have been established. Should there be any legislative changes in relation to salary packaging, the University reserves the right to make alterations to the procedures.
Staff cannot claim an income tax deduction on any benefits that are packaged. 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.
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 FBT and as such these benefits will have a 'nil' taxable value for FBT purposes.
Unlike some not-for-profit organisations, the University is not considered a public benevolent institution (PBI) as defined by the ATO, and is therefore restricted in the range of benefits that can be offered to staff without attracting an FBT liability for the University.
The cost of a staff member's remuneration package should be no more than the total cost of employment prior to salary packaging occurring. In the event of any increase in taxation paid by the University, including FBT or any state tax equivalent, the University will pass on such costs to 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 1.8695) will be required to be shown on a staff member's Payment Summary. This amount will not be taxable to the staff member, but 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 procedure in relation to each of the benefits which may be salary packaged.
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% when received by a complying superannuation fund.
The concessional contributions cap has been reduced to $25,000 p.a. (indexed) from the commencement of the 2012/13 financial year.
When an individual exceeds their annual concessional contributions cap of $25,000 in a financial year, the excess contributions will be subject to an excess contributions tax of 31.5%. This is equivalent to the top marginal tax rate of 46.5% and may be higher than an individual's applicable marginal tax rate.
Further information relating to payment of excess contributions tax can be obtained from the ATO's information regarding superannuation.
Individual Staff Member
The individual staff member is responsible for:
HR Operations, Monash HR
HR Operations, Monash HR is responsible for:
Workplace Relations is responsible for ensuring compliance of procedures with the University's relevant workplace agreements.
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