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% when received by a complying superannuation fund.
From 1 July 2009, the limit on the amount of concessional contributions that can be made by an individual has been reduced by 50%. Concessional contributions to superannuation will now be limited to $25,000 per person per annum.
The transitional period for those 50 years of age and over will continue to apply until 30 June 2012. During the transitional period, the cap on concessional contributions will be $50,000 per annum. A person who turns 50 during a financial year will be able to use the transitional arrangements for all of that financial year.
Where a person exceeds their annual concessional contributions cap of $25,000 (or $50,000 transitional cap if over 50) in a financial year, the excess contributions will be subject to an excess contributions tax of 31.5%. When this is combined to 15% contributions tax contributions above the cap are effectively taxed at 46.5% i.e. the top marginal tax rate plus Medicare levy.
Excess contributions tax is applied to the individual, not the superannuation fund however a person will be able to request 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
|
