Hi
My new employer are offering salary sacrifice with MAXXIA.
As it s totally new for me, Is it worth doing it?
THANKS
Is It Worth Doing Salary Sacrifice ?
bennarra on 08/01/2022 - 22:41
Last edited 09/01/2022 - 12:14 by 1 other user
Last edited 09/01/2022 - 12:14 by 1 other user
Comments
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Depends on how much you earn, what other commitments you have, what you are salary sacrificing.
Speak to your accountant.
hi, i don t have an accountant , not sure i need one for the moment
Find an accountant and ask them if you need an accountant.
The answer from any accountant is YES
@HeWhoKnows: Not true, only for some salaries and only when you want a new car every 1-5 years.
There are some disbenefits nobody seems to talk about, you get a fuel card but you cannot use supermarket discount dockets for fuel, the future car value can often be less than the residual lease payout value at the end of your term and the reported salary package gains provided by novated lease providers can be overstated. There are also a lot of tax implications with payouts etc. but best to speak to an accountant on that one.
@frugal investigator: Why is it worth it if we want a brand new car every 5 years?
Novated lease providers assume that you would be financing the car at a 7 or 8% interest rate if you don't get the lease with them.
@devank: There are car financing offers all the time, I got a new car on 2% finance so it’s not comparing right (some people pay for cars outright too). I used to lease but I don’t need a depreciating asset every 5 years. I try to go for 10 years so not worth it for me.
As for why it may be worthwhile if you buy 3 cars in 15 years, Well it’s usually cheaper than buying 3 cars outright! Although i say this with a caution, read the contract carefully and understand what the terms and fees
@frugal investigator: WRONG ANSWER!!!!!!!
in reply to the comment above mine…..
"Find an accountant and ask them if you need an accountant"
The correct answer is……
"The answer from any accountant is YES"
@frugal investigator: You dont agree the answer to
"Find an accountant and ask them if you need an accountant"
that any accountant will always say YES!
@HeWhoKnows: Any reputable accountant will assess your financial situation properly, ask you questions such as how often you are going to update your car and provide you with the best advice.
Your bad advice may mean somebody not going to an accountant when they should be.
@HeWhoKnows: Thats a no.
There are reasons you may not want to salary sacrifice.
A general example for an Australia resident for tax purpose if you earned less than $18,200.
If you did salary sacrifice in this case you would most likely pay more tax.It also depends on what you can sacrifice for.
It can get complicated since a portion of the salary sacrifice might be a reportable fringe benefit (RFB).
@pandadude: WRONG ANSWER!!!!!!!
in reply to the comment above mine…..
"Find an accountant and ask them if you need an accountant"
The correct answer is……
"The answer from any accountant is YES"
@frugal investigator: He's spamming because the two people that replied to him did not understand what he was saying at all. His joke went way over your heads.
If you are good at maths, good with excel and happy to study up a bit of the tax code it's not that difficult… I think accounting is so hard because they can't be bothered… Which is not the same thing
You need to know the tax law inside out
Mistakes can cost you dearly
For unfamiliar income tax issues use an accountant for first year to get all the tips and ways to set up your tax
Then in subsequent years you can probably do it yourself
hi, i do not need a new car, mine is totally fine, i do not have owe any money to anyone or bank , and i m paying only small amount for my rent every week (180) , earning around 80 000 / year.
So what do you want to salary-package then?
have no clue ! as we can get a credit card as well to be use for groceries / dining out /entertainment …
As it s very confusing, i m just trying to get some information about it.When i am talking to my co worker, most of them are telling me to do it !
..as we can get a credit card as well to be use for groceries / dining out /entertainment
Not everyone can just decide they want to package those things. You can can only do those particular items (up to a limit) if you a healthcare worker (and I think also the not-for-profits).
@bobbified: yes, it s possible for me to do that. I can choose to sacrifice a certain amount for different things.
Make an appointment with their info person at your workplace and ask them to explain it to you, like you are a 5 year old. Overall it’s worth it if you are making $80k a year. I am with Maxxia as well.
It is confusing but you can normally speak to someone from the salary sacrificing company and ask all your qs before you decide. Simple things like dinners out, rent or mortgage etc can all make an impact to your take home pay and i think it's a good idea. If it's a NFP, imo it's worth it. Have a chat with them. Any qs, dm me. Mine takes $10 per fortnight but gives me much more back.
credit card good idea i put few hundred into let it basic bills or shopping at supermarket.
I believe what you are referring to is "Salary Packaging" and not actually "Salary Sacrificing", many people use these terms interchangeably but it is very different.
If it is Salary Packaging then it is a definite yes as you are effectively using some of your pre-tax dollars to purchase every day expenses/meals & entertainment/credit card bills/mortgage repayments etc. - things that you need to pay anyway. There are some expenses involved like a very small admin fee (i work in Healthcare and they take out only around $2 of admin fee every fortnight) and in some organisations they take a share of your "savings" but in the end you are still ahead. It was originally a scheme designed to attract talent to work in NFP/Public Health by giving them somewhat of a tax break to compete with the higher salaries offered by the private sector.Now Salary Sacrifice is completely different as it refers to the arrangement with your employer to take out extra income to put away into your super. In most cases you save on tax as it is only taxed at 15% instead of your income tax rate (e.g. 32.5% if earning over $45k p.a.) but you will lock away this money for many years or decades. This you definitely need to consider your personal circumstances, tax bracket and probably should talk to an accountant.
Hope this helps!
@jaycee: Good explanation.
How can you salary package travel to work. Eg live in Sydney but work location is in Melbourne? Travel, Food, Accomodations? Can that be salary packaged??
Thanks!
@MrBillions: Salary packaging can only be done if your employer has the facility to do so. Not every employer can provide a salary packaging benefit. Generally some healthcare, NFP and some educational organisations do salary packaging.
If you do work for an organsation that does salary packaging then you can package your mortgage/rent and meals/entertainment (including travel and accomodation). I think the maximum yearly expense for meals and entertainment can be around 1800 AUD. For mrtgage/rent it can be around 15000 AUD per year iirc.
You need to keep receipts for everything. For the last few years they have also started providing you with a meals entertainment card. A fixed amount from your salary goes into this card and you can use this card for meals and entertainment expenditure.
sounds like an engineer? are you an engineer in your first year? XD
short answer - dont do it for the sake of doing it
If you can salary sacrifice your daily expenses like eating out, that is always worth it.
Most people in the medical profession are allowed to salary sacrifice eating out… It's like getting a discount on eating out based on your highest marginal tax rate.
They can salary package rent and meals/accommodation.
Yeh - OP wasn't very clear with his post.
You can salary sacrifice rent (and mortgage? ) ?? What companies / industries do this?
Only limited to healthcare and NFP?@OzFrugie: Yes it's crazy, I don't see why doctors need this, but I'm good for nurses to have this and other health workers to have this perk especially in the public sector.
@SeVeN11: The theory is that it would make the public sector/NFP more competitive with the private sector. In NSW, given NSW Health keep half, it really doesn't help with that at all in the public sector.. which is why their retention rates are terrible.
Car is not the only thing you can salary sacrifice; you can with superannuation, laptop, and even your mortgage (not every job allows that)
Interesting….Where do you find a list of who can salary package what?
@MrBillions: There are websites that tells you but I use Smart salary and I know they allow you to salary package these items.
@MrBillions: Non for profit, education, and healthcare sectors get it, but not sure of the exact details. I work for a NFP and the HR rep was able to send me the details of the provider they use along with a list of things that can be packaged.
Then the answer is no. Move along.
Those portion of salary you sacrifice only taxed at 15%, lower than 32.5% your highest tax rate. And if you are with a top performing super it could earn 10% return pa. if you can live without it, yes you are better off. You can always change it if you happen to need that extra income.
thanks, i m not really keen of doing it , this is why i m trying to find out what s the best option.
Does it have an impact of tax return at the end of the financial year ?Just say you salary sacrifice $100 a wee,k thus $5200 a year. On tax return your salary is 80k-$5200=$74,800. You saved $5200x(32.5-15)%=$910. Don't forget as well the compounding factor of $5200 pa with 10% yearly for 20 years is quiet a lot ($297,830)
are you thinking employer contribution/salary sacrifice to super? salary sacrifice takes money out of your pre-tax pay, subject to administration fee and the FBT cap (usually 9k, unless NFP which is 15k). it's not taxed at 15% unless you put it into super
@Halc: What I mentioned is about salary sacrifice which is not subject to FBT - after re-read OP, it seems he actually meant for salary packaging - which is indeed subject to FBT.
Does it have an impact of tax return at the end of the financial year ?
Just an FYI, if you have a HECS debt you're paying back, your company will usually only hold back the amount based on post-salary sacrifice but HECS is paid based on pre-salary sacrifice. So you may find you'll need to pay back but you've been missing out throughout the year.
Hey do you mind explaining this a little further? I think I understand the crux of salary sacrificing but the bit on HECS repayments still trips me up.
@covid-20: I'll be honest, I have trouble understanding it also. But as I understand, if say you make $1000 a week but $50 of that is salary sacrifice on groceries (health benefit) then you're only taxed at the left over ($950) thus decreasing your taxable income (taxing of the $950 instead of $1000).
The issue is your company will hold HECS of the $950 (taxable income) (lets estimate 10% of $950 = $9.50 for explanation sake)But HECS is actually based on the total (gross value before the reduction or essentially the $1000) so you actually owe (lets estimate 10% of $1000 = $10) so you're actually 50 cents short per week. But you do this a whole year and with bigger numbers and come tax time you find out you're a grand short.
Always catches people out when they salary sacrifice in health for the first time.
@trustnoone: This is important but it's actually even worse. The HECS repayment is based on hypothetical pre-tax income. Eg to get $50 post tax would mean $70pre tax, so you pay HECS on $1020. Your income for HECS purposes will be higher than your actual compensation package.
@trustnoone: I think you are confusing salary packaging with salary sacrifice (please refer to my comment above).
Using your hypothetical example, if you are salary packaging groceries at $50 week, you are only taxed at $950, you are still getting more money into your pocket than if you were taxed at $1000. That is because you get your $50 back from your salary packaging company minus a small portion of admin fee and in some cases depending on your organisation a portion of your savings generated from this tax break.
Because of your tax savings, your effective salary is actually bit higher than $1000 weekly while you still have to pay HECS as if you earn $1000 a week - so I don't think you will be worse off any way.
Salary sacrificing on the other hand means you "sacrifice" an extra portion of your salary into super and get taxed at 15%, it has nothing to with groceries/mortgage repayments/credit cards etc.
In short, salary packaging puts more money into your pocket as a portion is not taxable (0% tax) whereas salary sacrifice means less money in your pocket as you put that portion into super instead (15% tax). Hope this makes sense!so I don't think you will be worse off any way.
You're right in that I meant salary packaging instead of salary sacrificing cheers. But I'm not saying you'll be worse off or not (I think you're better off). It's that at the end of the financial year, you'll be around a grand short in taxes you're meant to pay and not realise it which can affect your budget comes tax time and ATO asks for an extra grand.
@trustnoone: Sorry I misunderstood (and I should be probably be replying to the person below you who said it is "even worse") - apologies!
But yes I agree, just need to be mindful you might be owing an amount to the ATO by tax time.
@jaycee: Cool, vivid response. So my understanding after reading this thread is that I may find myself owing some money to the ATO come the end of the financial year given my HECS debt will be calculated from a higher salary than what my contributions are deducted from?
@covid-20: Yes that is correct. You could always get your employer’s payroll to up the HECS deduction to make up the shortfall in the fortnightly pay or just make it up at tax time. The latter is better since money in your hands is still better than in the government’s, provided you are disciplined enough to not spend it and make good use of it before tax time (i.e. put it in an offset account to reduce mortgage interest or put it in a savings account to earn interest, etc)
Yep, I got caught out by this. Salary sacrificed to under the HECS cap, but didn't realise it was based on pre-sacrifice salary. Lucky there were a few bucks in the tax refund that covered it.
Worth it if you work for a charity or public hospital. Otherwise not really much benefit.
yes, i m working for charity/ non profit organization
Your employer or the provider should have some sort of new starter information pack. Essentially, below a certain dollar amount each year there is no FBT (fringe benefits tax) so you can sort of use pre-tax income to pay for living expenses.
Then you need to ask them what you can salary sacrifice without attracting FBT and decide. They have allot more options than a normal company.
I work for one as well and assuming they load your card like a salary sacrifice westpac mastercard with money in every fortnight. I get the full amount packaged per year ~$635 per fortnight, ~$55 for dining/entertainment. Over 25 fortnights. So total about $18500 gross income, all tax free. It would mean at 80K, you would be taxed at maybe 61k per year. But if you have HECS, they make you pay a lot more, I think due to FBT? Mine doubled in payments so it equals out where all that tax you would of paid is now paid into your HECS debt. Which I think is good.
As for the card, I sometimes have trouble spending all of it. You pay for groceries, electricity bills, water council etc but also for all impulse buys from stores. I just couldn't use it for lottery. The only one that declined so far lol. The meal and entertainment is harder to spend now that no one is eating out. Sometimes I just have a birthday party at the end of the salary packaging year and use it all up at a restaurant. The other one, you could just buy gift vouchers instead.
The best scenario is once you have a mortgage, it can go all into your offset account. Provided you have proof of the amount of your repayments.
It's great
Hi, Munro999,
I remember years ago, when I Salary packaged my home loan, I was told the pre-tax money had to go to the loan account, and couldn't be an offset account.
Can you put pre-tax money in the offset accounts (now)?
Thanks.
@littlepcat: Hi ,yeh my experience was with Advantage salary packaging. But needed to show it was regular payments that exceeded what was packaged and taken out of offset anyway. I remember it had to be the home you currently live in and show regular payments for a few months. I had mine stop because my loan changed to investment. But my colleague got the same thing happen, placed into their offset account.
Then they need to pay FBT
Mostly your employer will offer
Preloaded Visa /EFTPOS card which will have short validity.
You need to use it within that period.Aren't NFP FBT exempt? I know mine is.
Changes made many years ago (due to too many people were upset about it) made Sal Sac only worthwhile if you are working for NPF PBI only where you get $16k Sal Sac + $2.5k Meal Sal Sac.
So not all charity and certainly not public hospital will give you this full entitlement.
In short, I've worked out unless you are working in PBI, it's not worth it. You will elevate your RFB artificially, reporting higher income that you actually earned due to assumed grossed up benefits at max tax rate (48%?) as substitute to your income when if you don't sal sac, you would be taxed on average 25% on $100k salary.
If you receive govt benefits, RFB will screw you big time.
Also though RFB is irrelevant if you don't care about means testing ie pay child support or get parental subsidies etc. Also when talking about getting a full deduction on groceries and rent etc, that could be a greater benefit than parental subsidies depending on income.
If you never get means tested income support, then RFB is irrelevant although your PHI Rebate is also based on your ATI (higher RFB, lower rebate %).
Although for OP, this is irrelevant since OP earns < $90k BUT if OP sal sacs, this may elevate your RFB to cross $90k. $10k is too narrow of a gap to be safe.
You seem to have a great handle on this. I'm in a PBI, Type 2 Benefits for Packaging through Southgate, ~100k, not interested in novated leasing, but have a 35k HECS debt that will grow in the next few years (MBA). It seem like doing the packaging everyday purchase card and meal/entertainment card may be a smart move, thoughts?
OP should have stated this.
Pretty important thing to leave out.
For public hospital its literally free money, say you salary package mortgage/rent to the max allowed $9000 something. Thats 9000 less taxable income which is taxed at your top bracket rate 32.5%+medicare rate tax (for most people) around 3K tax savings. Half goes to you $1500 half goes to the public hospital $1500 (less fees)
Why half goes to public hospital? Won't the full tax savings goes to the tax payer?
I think it's because the employee only has access to the benefit because of the employer.
Not in the industry, but heard from my friends that only some states (NSW?) hospitals claim half. In others (VIC) all $3k is passed onto you and none to the hospital
Interesting
This. It's not a huge benefit, as the employer takes half of it, but it is a benefit. My wife works in a public hospital and uses it.
You work for a registered charity? If so you should definately be taking the credit card and salary sacrificing whatever limit they will let you, roughly a $3K annual saving for you on bills groceries etc. As for a car, that's a little different. I wouldn't consider it beneficial unless it's a car you wanted to get anyway and if it's outsourced to a leasing company, they can have management fees and rules around how much you spend, so it can put limits on your ability to negotiate the best deal and also make it harder to change employer.
How much can you salary sacrifice with your employer? I would do it 9/10
as long as it's not for a vehicle generally yes if it's spending you would make anyway eg. mortgage, dining out.
keep in mind NSWHealth and some NFPs will take half the benefits
also be wary it will affect your HECS repayments if you have a debtSalary sacrifice to what?
Car
Computer
Salary package credit card?
Superannuation?garbage question=garbage answers.
Why don't you ask your workmates if they use it. Generally if it's good everyone will be on board
Lots of free advice, no thanks, no upvotes and just an attack? I'd take my free info back if I could.
It's a fair comment, i thought you were asking about Super when i opened this thread.
Wait… so he's not asking about Salary Sacrifice/Employer Contribution for his Superannuation?
I'm so lost.
brad1-8tsi is the first commenter in this thread to bring up the idea of salary sacrifice into superannuation, so it is probably one of the better comments so far, so no need for your rude outburst.
Putting additional funds into super is very tax effective but it depends on your age, debts, life stage, existing super and many other things. Later in life many people salary sacrifice into super to boost their fund, but there’s a good argument for doing so (in a small way) much earlier in life. Well worth reading up on it & asking people you trust (not OzBargain)
dont worry man. I usually fear to ask questions here. the majority are arrogant, they try to bash you in a condescending manner, they might just ignore the question but they prefer to boost their ego. typical keyboard warriors.
thanks for your nice reply bitter old man ….
Not bitter. I probably have a far more positive outlook on life than you do.
I'm not willing to waste my time giving incorrect answers.
I have direct experience in salary sacrificing into superannuation and purchasing a motor vehicle and a laptop via salary sacrifice.
jog on.
Salary sacrifice benefits depend on what you sacrifice and what you do for work.
Suggest you contact Maxxia and arrange an obligation free information session, get some phamlets or information booklet. Then ask them to give you quotes if you want to sacrifice this and that. Ask specifically what the before and after tax amount is.
Then post on this forum with this information.
I would be looking into salary sacrificing your super. :-)
That’s something you can do without paying a third party (eg. Maxima) fees.
Get some advice from our Super fund on this.
Hi! I have maxxia through a private hospital. We get around 9k sacrificed and as you don't have to pay fbt tax then it's fab. Get an extra couple hundred in pay each fortnight.
However just double check if they will take fbt out… new job I have is with not for profit but they still have to pay fbt and pass that on to me.. so while I now can sacrifice around 15k… I actually am getting less than the hospital due to now have to pay fbt.Hope that makes sense but happy to explain further if you'd like :)
thank you for your nice reply ! the company i am with as just been bought and now we are able to sue MAXXIA so it s totally new for all of us.
If you use salary sacrifice, does that mean at the end of the financial year you ll get less tax return, is it related ?You really need to do some research into what salary sacrificing, and more about this company Maxxia. Your comment here shows your still learning and would really benefit from some financial advice (that isn’t from a message board).
Either read up yourself, or find a financial adviser.I was thinking of salary sacrifice but I rang the company, I found out there are other fees and interest charged. In the end, it wasn't as good as I thought so I didn't proceed. Highly recommend you ask what fees you will need to pay, do some calculations before proceeding. As ozbargain members said, depends on one's financial situation. May be best to seek advice from professionals such as accountant. You may like to disclose your complete financial situation on this forum, some members may give their advice.
'the company i am with as just been bought and now we are able to sue MAXXIA'
whoa - sounds like your problems are bigger than your first post revealed
if you can sue MAXXIA, I'm guessing it's more like sunk cost, trying to find out where your money went
{gets popcorn}
[unless your English typos actually meant not 'sue' for financial losses, but more like 'contribute to super' … ?]
I think he means use
You need to ask an accountant for advice.
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I would say no. However it might be worth it depending on what type of car you want and how much money you earn.