Salary packaging

Salary packaging makes business sense. It is a good way for printers to attract talent because they increase the take-home pay of their employees – at no extra cost.

How does it work? It is essentially a tool, approved by the Australian Taxation Office, to restructure pay so that the employee can pay for approved items using a portion of their salary that has not been taxed. This allows them to reduce their taxable income and puts more money in their back pocket. For the print business owner, it is a great way to reward and recognise employees’ hard work, without increasing wages.

Salary packaging is an employee perk, so offering this option can make the business substantially more attractive to potential employees. And there is a good business reason to bring it in: salary packaging can give the print business owner a leg up in recruitment and makes it more likely for that printer to be recognised as an employer of choice. It will also save money on staff turnover not to mention recruitment. More employees will want to be associated with a company that offers this salary perk.

While there is no restriction on what can be packaged, it generally falls into three categories.

First we have the fringe benefits like cars, health insurance, loans, school fees and child care fees. Then there are exempt benefits like electronic devices, computer software, briefcases and clothing.

The final one is superannuation. Super is actually the best way to package a salary because of the benefits for employees. Consider this: a portion of the salary is sacrificed into superannuation. That allows employees to reduce their assessable income for tax purposes, as a greater proportion of their salary is contributed into super before their income tax is calculated.

Let us say, for example, the employee earned $100,000 (including the super guarantee) and made a $21,000 salary sacrifice. They would go from paying $9870 income tax on the sacrificed amount (at 47 per cent, ignoring the Medicare levy) to paying just $3150 including a 15 per cent super contribution tax, while ignoring the small surcharge. So they get $6720 for free, it would previously have gone to the taxman, although they cannot access it until they retire.

Salary packages can also include cars; the most common method is through a novated lease agreement. Novated leases are essentially where the print business owner funds the vehicle payments and running costs from the employee’s pre-tax salary.

Childcare is another good area for salary packaging. The need for childcare and the sheer cost has exploded, with so many single parents plus the rising cost of living forcing both parents to seek work. Parents would want a childcare centre near their place of work. That becomes critical when they think about accepting a position. So a salary package with child care will make it easier for them to come over to you.

There is a fringe benefits tax exemption for child care facilities provided on an employer’s business premises for the benefit of employees.

In a tight recruitment market, where companies are struggling to find the talent, the salary package could be a handy tool for print business owners. It makes it easier to recruit and retain staff and ultimately cuts recruitment and training costs.

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If you have a news story or tip-off, get in touch at editorial@sprinter.com.au.  

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