Income Shifting Using Salary Packaging / Novated Lease

meowsers on 27/06/2021 - 21:22
Last edited 27/06/2021 - 21:23

I am salary packaging at a non-profit where the provider allows over the cap packaging (IE stuff the ATO already allows you to claim), allowing you to choose any amount to have deducted pre-tax.

Hypothetically I could tell them to deduct 2k a month (or more, I've spoken to them and they don't care what the amount is) they just place it in my "pre-tax account" and any amount I don't use can be returned to the employer at any time to be taxed and given to me as usual.

If I am going from full time to part time, could I say ask for a large amount to be withheld and then have that money returned to me in a different tax year? Thereby smoothing my income and having the majority of that money taxed at a lower rate.

Has anyone done this before? To essentially move earnings to a new FY.

Financial

Comments

  • AndyC1 on 27/06/2021 - 21:34
    +1

    Ask accountant, but I think the answer will be no.

  • mskeggs on 27/06/2021 - 22:09
    +1

    I am not an accountant, but I think yes, for the idea of smoothing between full time and part time work, but no, for the idea of carrying over to another tax year.
    So if you over package this year, and come end of June you didn't pay enough tax, you will get a bill.
    If next year you earn less is irrelevant, and you will have to pay whatvere that year needs for tax.

  • taoz on 27/06/2021 - 23:59

    yes, assuming the salary packaging company are holding the funds

  • Transient on 28/06/2021 - 09:35

    You will need to discuss with your company's payroll team as to whether that is allowed. My company used to have something similar but it only applied to bonuses (if we received one), ie, bonus could be carried forward to future years. From memory, we could not carry the core component (ie, non-bonus) over different tax years as created problems. If the pay letter says you earn 50K per year, the ATO might regard that as having been earned even though not received in hand. Also, for my company, the amount deferred did not earn any interest, etc, but was good for income smoothing and certain tax thresholds.

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