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Salary Sacrifice
o Disclaimer
We believe the advice and statements herein are accurate and reliable
but we give no warranty in relation thereto and we expressly disclaim all
liability for any loss or damage which may arise from any person acting on any
such advice, statement or in any other way for errors and omissions. We do not
give financial advice about accepting or rejecting a package. The information
contained here is not intended to be advice, whether legal or professional. You
should not act solely on the basis of the information in these examples.
You should seek professional financial advice before entering a salary
sacrifice arrangement of any kind or consult the Australian Tax Office.
o What is salary
sacrifice?
It is an arrangement between an employer and an employee, whereby the
employee agrees to forgo part of their future entitlement to salary or wages in
return for the employer providing them with benefits of a similar value.
You nominate to have certain benefits e.g. motor vehicles,
notebook computers or superannuation paid by your employer from pre-tax income,
i.e. before you pay income tax. By salary sacrificing you can potentially reduce
the amount of tax that you pay and maximise your net salary. This can then be an
effective way to claw back some of their income that falls into the higher tax
bracket.
Your own personal circumstances will determine whether salary packaging will be
of benefit to you so it is important to review your situation with a financial
adviser.
Salary packaging is not compulsory and may be entered into
or cancelled at any time.
o How does
salary sacrifice work?
Salary sacrifice calculations depend on many factors*. Legislative changes to taxation legislation
including but not limited to Income tax, Fringe benefits tax and GST can impact
on the benefits packaged.
The benefit of using salary sacrifice is in being able to pay for an
eligible item in pre-tax dollars, so depending on your tax bracket the impact
on your take home pay can be considerable.
If we take however a basic example, imagine you are earning $60,000pa
(30% income tax rate) and wish to purchase a laptop costing $3,000 including
GST.
If the purchase was made in the traditional way, the employee would need
to earn $4379.56 before the deduction of income tax and a Medicare levy to pay
for it*.
If salary sacrificed, you are allowed to pay for the laptop using your
gross salary before income tax is applied. Savings are based on your income tax
bracket because you are paying in pre-tax dollars.
The effective price for the notebook after salary sacrificing is
estimated to be $1868. This represents an estimated saving of $1132 *.
Salary sacrifice is more effective the more you earn (and reach a new
tax bracket)*.
* We do not give financial advice about accepting or rejecting a
package. You should seek professional financial advice before entering a salary
sacrifice arrangement of any kind or consult the Australian Tax Office.
o I am
sceptical about this supposed saving. Why should the government subsidise a
notebook for my own purposes?
It is sometimes natural to be sceptical about getting a substantial
saving. The fact is that you can salary sacrifice many items including items
that may already be familiar to you such as superannuation contributions.
Salary sacrifice is legal and is already an established practise in
both private and public sectors.
Some people see this approach as a way for the government to incentivise
working people to adopt technology.
Salary sacrifice is legitimate and full details regarding this and
fringe benefits tax can be found on the Australian taxation Office website at www.ato.gov.au
o What is a
salary sacrifice arrangement?
A contractual agreement with your employer to alter your salary package
by exchanging part of your future salary or wages for another benefit is called
a ‘salary sacrifice arrangement’.
o Who is eligible?
Eligible staff can participate in a flexible salary sacrificing
arrangement with their employer if you they are working permanent full time or
part time. Some employers may however at their discretion choose to offer such
arrangements to certain staff only. Some employers for example only offer such
services to management. Please discuss this with your employer.
o If my employer refuses to let me enter into a
salary sacrifice arrangement, can I make
a claim for the notebook when I lodge my tax return?
Salary sacrifice is an arrangement between an employer and an employee
and not with the Australian Tax Office.
Under such an arrangement you agree to forgo part of your future
entitlement to salary or wages in return for a benefit (e.g.a notebook) of a
similar value.
If your employer refuses to let you salary sacrifice, you can not claim
this benefit when lodging your tax return. You can however claim a deduction on
work related expenses depending on your situation*.
For some employers, entering into such agreements can put an added
strain on payroll systems and create tax compliancy issues. This may cause them
to evaluate the costs to the employer (soft costs) in comparison to the
benefits and flexibility for the employee.
*We do not give financial advice about accepting or rejecting a package.
You should seek professional financial advice before entering a salary sacrifice
arrangement of any kind or consult the Australian Tax Office.
O What is the Fringe Benefits Tax (FBT) year?
Even though you can usually commence salary
packaging at any time during the year the term FBT Year refers to the period
that commences on 1st April and finishes on the 31st of March. The FBT Year is
used for the purpose of calculating and reporting on FBT each year.
o How many notebooks can I salary sacrifice
before I have to pay Fringe benefits Tax?
The Fringe Benefit Tax exemption (FBT) is limited to the purchase or
reimbursement of one computer per year (from April to the following March following
the FBT year) per employee.
o What happens
if I buy a second notebook within a financial year and salary sacrifice it?
The Fringe Benefit Tax exemption (FBT) is limited to the purchase or
reimbursement of one computer per year (from April to the following March following
the FBT year) per employee.
If a second notebook is purchased within the same FBT year, it will no
longer be FBT exempt.
If however, a notebook is fully salary sacrificed (fully deducted from
gross income) by the end of March (the end of the FBT year), another notebook
may be purchased in April (the start of the following FBT year) and salary
sacrificed*.
*Important note: While we can give details about how fringe benefits tax
(FBT) is calculated, we do not give financial advice about accepting or
rejecting a package. You should seek professional financial advice before
entering a salary sacrifice arrangement of any kind or consult the Australian
Tax Office.
o What else can
I purchase using salary sacrifice?
A mobile
phone that is used primarily for use in your employment as well as other portable computers
such as a PDA (Personal Digital
Assistant). Software that is also used in the course of
your employment may also be claimed as well as a portable
printer designed to work with a notebook computer.
The ATO advises that the FBT exemption under S.58X (2) (h) cannot apply
to computer accessories that are not considered necessary for the basic
operation of the Laptop computer. This then excludes normal printers, external
monitors, external hard drives, USB keys, non work related software etc.
For more information search the Australian Tax Office legal database for
interpretive decision on the applicable law or consult a professional financial
advisor.
o What else can
I purchase with myE-volve?
We provide a select range of products from the field of IT and Audio
Visual (AV) that represent value to our customers. We try to provide access to
products using the buying power of your employer and our other customers.
o What else can
I purchase with myE-volve for Salary Sacrifice purposes?
E-volve can currently supply you with a notebook, PDA, portable printers
or mobile phone at very competitive pricing. We do not however provide products
or services relating to vehicle leasing or superannuation.
o Can I purchase a desktop computer and obtain the
same tax benefit as a laptop through salary sacrifice?
No. Due to restrictions from the Australian Taxation Office a Fringe
Benefits Tax exemption that applies to notebook computers does not apply to
desktops.
o What if I
can’t find the product I need?
If you can’t find the product you need, you can contact the myevolve
team so that we can help find it for you.
myevolve will endeavour to help you find what you are looking for given
that:
§
the item is readily available
in Australia and not pulled from an international website
§
myevolve can get access to the
item
§
the item has not been
obsoleted or ended by the manufacturer
§
the product is consistent with
other products available through myevolve (usually of an IT/Computer or AV
related field)
o Will myevolve
price match product?
If you have found a better priced product in the market and would like
myevolve to price match, you can contact the myevolve team so that we can
attempt to price match it for you.
Myevolve will endeavour to price match any competitor offering where:
§
The comparison is for the same
product including all the parts of a bundle as identified by brand, model
number and specifications
§
The competitor is holding stock
of the item/s
§
Evidence is readily presented
to help us identify the exact nature of the competitor offering
§
We are able to readily contact
the competitor to verify the competitive offering
§
The offering does not fall
under our cost price
§
The price will only be dropped
for a specific customer requesting the price match
§
The offering is not presented
on ebay or a similar type auction site
§
The competitor is closing down,
changing ownership, under administration or in liquidation
o What are the
implications of entering into a salary sacrifice arrangement for me as an
employee?
§
You pay income tax on the
reduced salary or wages but will receive the reduced salary and non-cash
benefit.
§
Your employer may be liable to
pay FBT on the fringe benefits provided
§
Your employer may be required
to report certain benefits on your payment summary that may result in
surcharges or other obligations given your situation. The value of fringe
benefits reported on a payment summary is known as the reportable fringe
benefits amount. The sum of an employee's reportable fringe benefits amounts
from every employer for a year is called the reportable fringe benefits total.
The reportable fringe benefits total is not included in the employee's
assessable (or taxable) income and does not affect the amount of basic Medicare
levy payable.
§
The total will, however, be
used to calculate a number of income tests relating to government benefits and
obligations*.
§
Save on GST provided your
employer is claiming a tax input credit
§
Save on interest fees for
credit provided your employer allows you to pay the remaining amount owing from
your pay without interest
§
Depreciate your notebook if you
use it for work purposes and save more
§
We always suggest you talk to a
professional advisor to examine how these principles apply to your situation.
O Why should I
purchase with myevolve?
§
You pay income tax on the
reduced salary or wages but will receive the reduced salary and non-cash
benefit.
§
Leverage the buying power of
your company and our large customer database to achieve greater savings
§
Purchasing through myevolve is
easy and utilises a secure payment option
§
Evidence greater savings using
the myevolve system leveraging the powerful application we have developed to
help automate IT hardware purchasing
§
Save money compared to buying
retail from the convenience of your computer screen
o What are the
implications of an effective salary sacrifice arrangement for employers?
§
A salary sacrifice arrangement giving employees a non-cash benefit may
result in you having FBT obligations for those non-cash benefits. You are
liable for any FBT payable on the benefits received. The FBT payable is
determined at the highest marginal income tax rate, including the Medicare levy
(that is, 46.5 cents in the dollar). However, you may ask the employee to
contribute towards the FBT payable.
§
If you are registered for GST you may be able to claim a GST credit for
GST paid in providing the benefit. For fringe benefits which are subject to GST
and where you hold a valid GST invoice, you are entitled to claim the GST
credit when submitting your activity statement.
§
If the total taxable value of certain fringe benefits received by an employee
in an FBT year (1 April to 31 March) exceeds $2,000, you must report the
grossed-up taxable value of those benefits on their payment summary for the
corresponding income year (1 July to 30 June). As employees do not pay income
tax on fringe benefits, the grossed-up taxable value of a benefit reflects the
gross salary that would have to be earned to purchase the benefit from
after-tax dollars. This is calculated at the highest marginal tax rate,
including the Medicare levy. From April 1 2007, the fringe benefits reporting
exclusion threshold increased from $1000 to $2000. A $2000 threshold applies to
the 2008 income tax return*.
§
By supporting the program you help to increase the level of computer
literate staff in your organisation
§
Save on payroll tax. The savings will depend on the state legislation
pay roll tax rates and thresholds.
§
Save on Workers Compensation Insurance. Workers Compensation Insurance
is calculated on the total payroll. As the salary is being reduced, so too is
the payroll and the WCI to be paid.
§
In addition to this, our customers actively utilising the program:
§
Provide staff with additional purchasing power without increasing wages
§
Have access to another fantastic tool to retain employees and improve
motivation and loyalty through the provision of flexible remuneration packages
§
Help increase the level of computer literate staff in your organisation
§
Deflect enquiries to our website for salary sacrifice with IT equipment
rather than dealing with them internally
§
Help employees self educate themselves about how salary sacrifice could
work by using our calculator and FAQ statements
§
Create clear processes inform all employees of the way to proceed
reducing headache in HR
§
Access short term compelling buy options available for all staff
§
Access our demo program on request
§
Create less hassle for your own IT department as each invoice comes with
details of vendor support for the item purchased
§
Evidence greater savings using the myevolve system leveraging the
powerful application we have developed to help automate IT hardware purchasing
§
* We do not give financial advice about accepting or rejecting a
package. You should seek professional financial advice before entering a salary
sacrifice arrangement of any kind or consult the Australian Tax Office.
o How do I go
about salary sacrificing a notebook of this site?
If you
are accessing this site with your own password, myevolve has already entered
into an agreement with your employer.
§
Help employees self educate
themselves about how salary sacrifice could work by using our calculator and
FAQ statements
§
Navigate to the menu on this
site and choose the items that appeal to you.
§
When you have completed your
shopping cart, proceed by pressing “Place Order”.
§
Enter your order number or
reference number, contact details, shipping address and billing address
information.
§
Proceed to enter credit card
details using our secure credit card facility
§
Present the tax invoice to your
employer for processing with any additional documentation that may be needed
for processing at your particular company. Your employer will require a tax
invoice that shows:
o
Your name as
the recipient
o
the words ‘tax invoice’ stated
prominently on the document
o
Our name as the supplier
(e-Volve Corporate Technology)
o
Our ABN
o
Our address
o
the date of issue of the tax
invoice
o
the quantity of the goods sold
o
a brief description of the
things sold
o
the total price of the sale
(including GST)
§
Documentation will be checked
by HR and the arrangement will be approved if correct.
§
Reimbursement of the item/s
processed to the payroll system. The purchase price of the agreed arrangement
is returned to the employee as a non-taxable payment (inc.GST).
§
Your item for salary sacrifice
is processed to the payroll system. The salary of the employee is reduced by an
amount equal to the value of the laptop benefit.
o If I have a
problem with my notebook who should I contact?
If you have an issue with your notebook you should contact the vendor
for vendor support. Contact details are printed on the invoice for the item and
can be viewed through this portal.
Since all goods are delivered directly by the manufacturer or the
manufacturer’s distributor, we would strongly recommend contacting the
manufacturer directly for a faster exchange or return.
You should NOT contact the HELP desk of your employer.
myevolve has a returns policy (refer to Return/Exchanges) that applies
to faulty product only. Please refer to this section for more information.
o Can I salary
sacrifice my notebook and use it as a tax deduction?
Further savings may be achieved if your laptop is used for business
purposes allowing you to claim depreciation*.
You can depreciate the cost to the extent (%) that you use it for a
deductible purpose (e.g. used to help earn an income) as opposed to use for
private purposes.
Please refer the figures quoted in examples or in calculations on this
website to your accounting advisor to calculate your exact savings. Financing
options taken to acquire the product may impact on your ability to use the item
as a tax deduction.
* We do not give financial advice about accepting or rejecting a
package. You should seek professional financial advice before entering a salary
sacrifice arrangement of any kind or consult the Australian Tax Office.
o Can I also
add in software items and salary sacrifice these as well?
According to ATO ID 2006/23 (Australian Tax Office Interpretive
Decision), the provision of the benefits in respect to additional separate computer software is not exempt under paragraph
58X(2)(h) of the FBTAA, but can be considered for exemption under paragraph
58X(2)(f) of the FBTAA.
Any computer software forming part of the overall purchase price (that
is, not charged separately and no clearly identifiable cost) would be included
under the paragraph 58X (2) (h) for exemption. This applied equally to
pre-loaded software.
However, the purchase of additional separate computer software (even
where it is charged by the retailer on the same invoice as the laptop computer will not be exempt under paragraph
58X(2)(h). This additional software can be considered for exemption under
paragraph 58X (2) (f) of the FBTAA. An item of computer software need only be
for use in the employee's employment to be exempt under paragraph 58X (2) (f)
of the FBTAA. This does not require a predominant or primary test to satisfy
the exemption.
CAUTION:This is an edited and summarised record of
a Tax Office decision. This record is not published as a form of advice. We do
not give financial advice about accepting or rejecting a package. You should
seek professional financial advice before entering a salary sacrifice
arrangement of any kind or consult the Australian Tax Office.
This ATOID provides you with the following
level of protection:
If you reasonably apply this decision in good faith to your own circumstances
(which are not materially different from those described in the decision), and
the decision is later found to be incorrect you will not be liable to pay any
penalty or interest. However, you will be required to pay any underpaid tax (or
repay any over-claimed credit, grant or benefit), provided the time limits
under the law allow it. If you do intend to apply this decision to your own
circumstances, you will need to ensure that the relevant provisions referred to
in the decision have not been amended or repealed. You may wish to obtain
further advice from the Tax Office or from a professional adviser.
For further information consult the legal database of the Australian Tax
Office (www.ato.gov.au),
consult the Tax Office or a professional advisor.
o Can I
increase the memory of my notebook with my initial purchase and is this also
FBT exempt?
According to ATO ID 2006/237 (Australian Tax Office Interpretive
Decision), Any cost of upgrades involving built-in internal components of a
laptop computer, that are made at the time of purchase, such as additional
memory, a bigger hard drive, internal modem or wireless LAN module, which are
ordered and itemised on the one invoice (even at a separate cost) will be
exempt under paragraph 58X (2) (h) of the FBTAA. These items are clearly not
peripheral items in relation to the laptop computer and form part of the laptop
computer. It is no different, in effect, from simply purchasing a laptop computer
model with better specifications at an increased cost.
CAUTION:
This is an edited and summarised record of a Tax Office decision. This record
is not published as a form of advice. We do not
give financial advice about accepting or rejecting a package. You should seek
professional financial advice before entering a salary sacrifice arrangement of
any kind or consult the Australian Tax Office.
This ATOID provides you with the
following level of protection:
If you reasonably apply this decision in good faith to your own circumstances
(which are not materially different from those described in the decision), and
the decision is later found to be incorrect you will not be liable to pay any
penalty or interest. However, you will be required to pay any underpaid tax (or
repay any over-claimed credit, grant or benefit), provided the time limits
under the law allow it. If you do intend to apply this decision to your own
circumstances, you will need to ensure that the relevant provisions referred to
in the decision have not been amended or repealed. You may wish to obtain
further advice from the Tax Office or from a professional adviser.
For further information consult the legal database of the Australian Tax
Office (www.ato.gov.au), consult the Tax
Office or a professional advisor.
o If my
employer reimburses me over a two year period for the cost of a notebook, can
my employer provide me another notebook to me in the second FBT year as an
exempt benefit?
According to ATO ID 2005/149 (Australian Tax Office Interpretive
Decision), where there has been an expense payment benefit in relation to a
notebook computer earlier in an FBT year, the provision of another notebook
computer in that same year will not be an exempt benefit under subsection
58X(1) of the FBTAA.
This means that if an employer provides a number of expense payments
with respect to one computer, over say a two year period, then another computer
cannot be provided as an expense payment benefit or a property benefit in
either the first or second year of payments. This is because there has already
been expense payments made in each of those years in relation to a notebook
computer, notebook computer or similar portable computer.
CAUTION: This is an edited and summarised record of
a Tax Office decision. This record is not published as a form of advice. We do
not give financial advice about accepting or rejecting a package. You should
seek professional financial advice before entering a salary sacrifice arrangement
of any kind or consult the Australian Tax Office.
This ATOID provides you with the following
level of protection:
If you reasonably apply this decision in good faith to your own circumstances
(which are not materially different from those described in the decision), and
the decision is later found to be incorrect you will not be liable to pay any
penalty or interest. However, you will be required to pay any underpaid tax (or
repay any over-claimed credit, grant or benefit), provided the time limits under
the law allow it. If you do intend to apply this decision to your own
circumstances, you will need to ensure that the relevant provisions referred to
in the decision have not been amended or repealed. You may wish to obtain
further advice from the Tax Office or from a professional adviser.
For further information consult the legal database of the Australian Tax
Office (www.ato.gov.au),
consult the Tax Office or a professional advisor.
o What potential traps are there in salary
sacrificing?
§
Over-packaging: By over committing too much of your pre-tax earnings to a
salary sacrifice package you may not have enough take home pay to cover your
ongoing expenses.
§
Poor advice: myevolve strongly urges you to seek independent professional
financial advice
§
Failing to understand the concepts involved: due to the complexity of
working out the exact effects of a package on your personal situation, myevolve
strongly urges you to seek independent professional financial advice
o What happens if I leave my employer?
This situation needs to be
discussed with your current employer. If there are any unpaid amounts owing,
your employer may be entitled to deduct these amounts from your final salary
and/or leave entitlements.
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