How does salary packaging work?
You may have heard people talking about salary packaging, but what is it? How does it work? And if you could pay less tax by doing it, why wouldn’t you?
Salary packaging – or salary sacrificing as it's often known – is an exciting story, but it can also seem complicated at first. At Maxxia, we’ve been helping Australians understand salary packaging for more than 30 years, so let’s see if we can simplify it.
Ordinarily, your employer takes out income tax from your pay and deposits the remainder into your bank account. You then pay all your living expenses – including your rent or mortgage, car repayments, insurances, groceries and utility bills – and if you’re lucky, have a bit left over.
But with a Maxxia salary packaging account, your employer still pays you the same salary, but we help you pay those same expenses before tax is taken out.
This means your taxable income could go down, your disposable income could go up, and with some of these expenses already taken care of, you could have more money for other essentials and surprises.
It’s no surprise that thousands of Australians currently enjoy the benefits of salary packaging with Maxxia.
Make everyday living expenses work for you
An example. Let’s say Susie earns $60,000. She works for a charitable organisation, and her employer provides a program which allows her to salary package a range of expenses (discover more information on what you could package in our “What can I package section” below) up to a cap of $15,900 each FBT year.
By packaging to her full cap of $15,900 she could enjoy tax savings up to $4,857* each FBT year.
This amount doesn’t include other salary packaging benefitsshe could be entitled to, including Meal Entertainment (up to $2,650 each year) and salary packaging a car through a novated lease.
Please note that Susie’s ability to salary package is dependent on the industry she works in and her employer’s policy. Contact us to discuss the amount you may be able to salary package given your individual circumstances.
If watching a video could help you pay less tax, why wouldn't you?
The types of benefits and the amount you can package depends on your employer and industry you work in. We’ve created some helpful videos covering all the benefits that could be available by industry.
Salary packaging has many benefits, salary packaging with Maxxia has many more
What can I package?
GST Savings
Pay no GST on the purchase price of your car, up to the GST-savings threshold.
Corporate & Government
Doesn’t it feel like there’s a new car-related expense to pay every other week? Annoying! With a novated lease, your on-road costs are bundled into your one nifty regular payment that comes out of your pay automatically, covering petrol, servicing, rego, insurance and new tyres.
Rebatable & Others
With a novated lease, part of that regular everything-included payment comes out of your pay before the tax does, so you could end up paying a whole heap less tax. Plus you could skip upfront GST on cars valued up to $69,674. For cars with a driveaway price of over $69,674, upfront GST applies only to anything over that amount.
Salary Packaging Calculator
Calculate how much you could save with salary packaging
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FAQs
What’s the difference between a novated lease and a car loan?
With a regular car loan, you’d be making repayments with your post-tax salary. With a novated lease, your payment uses some of your pre-tax salary, which could lower your taxable income.
Then there’s the fact that all your running costs are bundled into one regular, easy, automatic payment.
PLUS Oly helps you find your new car, takes care of most of the admin and makes it easy to switch your car for a new one once your lease is up.
You won’t find a car loan that can do any of that!
Why should I take out a novated lease instead of buying a car?
A novated lease is based around a fixed length of time. So, if you decide to end the lease early, your payout might be higher than the market value of the car (and could include fees and charges from the money people).
When you set up your lease, it’s a great idea to structure it over a period that reflects how long you’ll want to keep the car to avoid any of those early cancellation fees.
Can I end my novated lease early?
Important Information
This general information doesn’t take your personal circumstances into account. Please consider whether this information is right for you before making a decision and seek professional independent tax or financial advice. Conditions and fees apply, along with credit assessment criteria for lease and loan products. The availability of benefits is subject to your employer’s approval. Maxxia may receive commissions in connection with its services.
*Salary packaging example: The estimated potential tax benefit is based on the assumption that an eligible employee salary packages the full $15,900 per annum limit. FBT rates effective 1 July 2024 and PAYG tax rates effective 1 July 2024 have been used. The actual administration fee that applies to you may vary depending on your employer. Tax, benefit, and Medicare levy calculations are approximate and assume no other taxable income is received. HELP repayments and taxation surcharges are excluded.
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