Jump to content

Salary sacrifice for car questions


  • Please log in to reply
20 replies to this topic

#1 FeralSchnitzel

Posted 26 December 2012 - 08:39 AM

We would like to buy a car, and have heard that salary sacrifice might be a good option for us, but we are totally clueless about the ins and outs of this. My understanding is...

We buy a car
DH has the payments taken out of his pre tax income (as long as there isn't a cost to the business, he should be fine about it)

And then there is something to do with FBT?
And KM requirements?

Can anyone please help me to fill in my big gaps?


#2 happy2bme

Posted 28 December 2012 - 04:38 PM

Have a look at www.smartsalary.com.au.  It will explain everything & includes calculators on costs etc.

#3 FeralSchnitzel

Posted 31 December 2012 - 02:36 PM

Thanks so much for your help original.gif

#4 Sassy Dingo

Posted 31 December 2012 - 08:25 PM

Firstly, does your employer support salary sacrifice? Lots don't - especially small employers as it is a headache for them, they'd have to do additional FBT returns (if they're not already) and manage the car and servicing and such. My employer does support salary sacrifice, but they run it through an external company which manages it all and you have to pay fees to go through them.

#5 jayskette

Posted 31 December 2012 - 08:34 PM

it's only worth it if after sacrificing you come to a lower tax bracket. You will need to travel something like 25000km/year or more? Most of these arrangements force you to have your car on a lease deal which isn't ideal for some.

#6 R2B2

Posted 31 December 2012 - 08:36 PM

My advice is to seek financial advice before committing to anything.
I agree with having a look at smart salary.

its all about pre tax/post tax.
the FBT from my understanding (but don't qoute me - hence telling you to seek financial advice) is if you don't meet the required KMs in the time frame you choose.

it works for some people, and not for others.

there is also a balloon payment at the end. from my understanding ours is $11k after 5 years of leasing. that part is not worth it in my opinion.

Edited by R2B2, 31 December 2012 - 08:38 PM.


#7 Coffeegirl

Posted 31 December 2012 - 08:57 PM

Talk to your accountant.

It may or may not work for your situation.

We salary sacrifice both our cars with novated leases.   DH easily meets his 15,000km minimum, but with a change of job, we have just had to do a 2,000 km road trip to get mine to the minimum.

My car is also starting to cost money sad.gif. So the petrol and maintenance costs are more than were calculated and we have had to re-pay some money.

We are now looking to sell my car and payout the lease to find something cheaper.


BUT.  The savings by bringing down DH's taxable salary is quite good.



#8 BJBubbles

Posted 31 December 2012 - 09:13 PM

We have one car SS through my DH and it's worth it to help bring his pre-tax income down.  We also like the convenience of it all.

Check the rules on FBT though -  I thought the km requirements had been changed and there was now one flat FBT level - whereas is used to be a gradient - the more km's you did, the less tax...?

ETA, it is slowly changing.  HERE is a link explainig the new thresholds, and by 1 April 2014 there will be a flat 20% FBT rate. If you enter into an agreement before April next year (2013) and you intend on driving more than 25000km's a year, you will have a slightly lower tax rate...

Edited by BJBubbles, 31 December 2012 - 09:22 PM.


#9 FiveAus

Posted 31 December 2012 - 09:20 PM

QUOTE (BJBubbles @ 31/12/2012, 10:13 PM) <{POST_SNAPBACK}>
We have one car SS through my DH and it's worth it to help bring his pre-tax income down.  We also like the convenience of it all.

Check the rules on FBT though -  I thought the km requirements had been changed and there was now one flat FBT level - whereas is used to be a gradient - the more km's you did, the less tax...?



The new FBT rule regarding kms doesn't take effect until April 2013 (or maybe 2014).

#10 IsolaBella

Posted 31 December 2012 - 09:42 PM

Isn't there something with FBT being grossed up for FTB items, so be aware if that then impacts payments.



#11 Lees75

Posted 31 December 2012 - 11:37 PM

QUOTE (lsolaBella @ 31/12/2012, 10:12 PM) <{POST_SNAPBACK}>
Isn't there something with FBT being grossed up for FTB items, so be aware if that then impacts payments.

Not for FTB, but for child support, HECS and Medicare surcharge (maybe Medicare levy?)

#12 OscarAndTilly

Posted 01 January 2013 - 11:21 AM

If you salary sacrifice a car (or anything) you have to estimate with centrelink at the pre sacrificed salary ie at the higher income

#13 Lees75

Posted 01 January 2013 - 11:25 AM

QUOTE (OscarAndTilly @ 01/01/2013, 11:51 AM) <{POST_SNAPBACK}>
If you salary sacrifice a car (or anything) you have to estimate with centrelink at the pre sacrificed salary ie at the higher income

Or you can report the lower amount, plus the grossed up amount of the salary sacrifice. CL the appy the FRinge benefits tax rate to the grossed up amount to get you back where you started- the initial income prior to the salary sacrifice.


#14 FiveAus

Posted 01 January 2013 - 11:34 AM

Only part of it is added back on for FTB, so you can use it to reduce your income if you are just over the threshold.

Use a calculation of 3 children aged under 12, each parent earning a taxable income of $50,000, one parent with fringe benefits of $20,000, gives you an adjusted income of $110,700 not $120,000.

#15 Lees75

Posted 01 January 2013 - 12:09 PM

QUOTE (FiveAus @ 01/01/2013, 12:04 PM) <{POST_SNAPBACK}>
Only part of it is added back on for FTB, so you can use it to reduce your income if you are just over the threshold.

Use a calculation of 3 children aged under 12, each parent earning a taxable income of $50,000, one parent with fringe benefits of $20,000, gives you an adjusted income of $110,700 not $120,000.

I don't think that's right, because the adjusted income calculation would be based on the grossed up figure, not the $20k.

#16 FiveAus

Posted 01 January 2013 - 12:12 PM

QUOTE (Lees75 @ 01/01/2013, 01:09 PM) <{POST_SNAPBACK}>
I don't think that's right, because the adjusted income calculation would be based on the grossed up figure, not the $20k.



Yes, it's right. Do the calculations on the Human Services website. If you add investment losses and reportable super to your estimate, they are added 100% back onto your taxable income but not fringe benefits.
Once you've input your figures, you can click on a link to see the adjusted income used for FTB.

#17 Lees75

Posted 01 January 2013 - 12:15 PM

QUOTE (FiveAus @ 01/01/2013, 12:42 PM) <{POST_SNAPBACK}>
Yes, it's right. Do the calculations on the Human Services website. If you add investment losses and reportable super to your estimate, they are added 100% back onto your taxable income but not fringe benefits.
Once you've input your figures, you can click on a link to see the adjusted income used for FTB.

But if someone is salary sacrificing $20k, to use your example, this is not the amount that is put into the calculators. You have to use the grossed up amount, which would be closer to $40k.



#18 FiveAus

Posted 01 January 2013 - 12:19 PM

Whatever the grossed up value is (and I used $20,000 as an example), 100% of it is not added back on, only part of it is.

So whatever you put in the calculator for fringe benefits, roughly 50% of it will be added back on, not 100%. And it's up to those claiming the payment to provide the correct figures.

#19 Lees75

Posted 01 January 2013 - 12:37 PM

If someone is on $70k, as per your example, and they sacrificed $20k, they would need to report it as $50k taxable income and the grossed up amount of $20k, which would be $37383 on their payment summary. Centrelink then reduces the $37383 back down to $20k to arrive at the adjustable taxable income of $70k.

Salary sacrificing/fringe benefits packages can't be used to lower your adjusted taxable income for Fam Tax benefits purposes.

#20 FiveAus

Posted 01 January 2013 - 12:45 PM

QUOTE (Lees75 @ 01/01/2013, 01:37 PM) <{POST_SNAPBACK}>
If someone is on $70k, as per your example, and they sacrificed $20k, they would need to report it as $50k taxable income and the grossed up amount of $20k, which would be $37383 on their payment summary. Centrelink then reduces the $37383 back down to $20k to arrive at the adjustable taxable income of $70k.

Salary sacrificing/fringe benefits packages can't be used to lower your adjusted taxable income for Fam Tax benefits purposes.


Use the calculator on the Human Services website and see what result you get using your figures.

#21 Lees75

Posted 01 January 2013 - 01:13 PM

I did. Someone with a taxable income of $70k is entitled to exactly the same amount Fam Tax Benefits as someone on $50k taxable income and $37383 Fringe benefits ($20k when grossed down).

That's how it works- otherwise everyone would essentially be double-dipping, getting the benefits of saving tax, plus getting more FTB.

ETA- XH and I did this for years. We only stopped when we split up and child support became involved, as they use the grossed up amount. He learnt the hard way....lol!

Edited by Lees75, 01 January 2013 - 01:15 PM.





1 user(s) are reading this topic

0 members, 1 guests, 0 anonymous users

 

Toddler attacked at gym creche

Two-year-old girl Eva Ness was left with a black eye and bite marks on her face and body after an altercation with an older child at a health club's child-minding facilities. Now her parents are calling for the centre to be closed.

Carseats have twice as many germs as a toilet

Most parents know their child's carseat is not always squeaky clean, but they might not realise just how dirty it really is.

Doctors remove foetus from 'medical marvel' after 36 years

Doctors in India have removed the skeleton of a foetus that had been inside a woman for 36 years.

Nine months in six seconds: new parents' Vine clip a hit

We?ve seen some memorable time-lapse pregnancy and birth announcement videos before. Now one new couple has taken it to the extreme, capturing it all in just a six-second Vine video.

Sonia Kruger speaks of baby joy

Celebrity mum-to-be Sonia Kruger has spoken candidly about using donor eggs and IVF to fall pregnant at age 48.

Dressing to not impress: life through the eyes of a three-year-old

When it comes to getting dressed, my three-year-old has only one criterion: ?I don?t want to look beautiful.? And now I've worked out why.

Special nappies made with love for angel babies

Angel Baby Nappies make and provide tiny bereavement cloth nappies for pre-term stillborn babies and premature babies who pass away in the NICU.

Inside the brain of a tantruming toddler

What's going on in your child's mind in the lead-up to a tantrum? And what?s the best way to respond?

5 secrets to a long-lasting relationship

When it comes to keeping your relationship strong, it?s what you do - and not what you want - that really matters.

When 'furbabies' meet real babies

I am obsessed with my dogs, and can't imagine loving them any less once my baby arrives. But that doesn't stop everyone from telling me I will.

The least popular baby names of 2013

Looking for a baby name that?s nowhere near the top 10 ? or even the top 1000? Try the bottom five.

'I was so sleep deprived I crashed my car'

There are no laws regulating driving while tired, but statistics show that driver fatigue is one of the top three contributors to the road toll.

Why are there so few sexy maternity bras?

Rather than feeling ashamed of their post-baby bodies, women should be free to buy lingerie that makes them look attractive and pretty - no matter what stage of life they're in.

Toddler Alliyah one step closer to first trip home

She has lived the first 14 months of her life in a hospital intensive care unit, but Alliyah Broadby's parents hope to finally take their little girl home with them.

'Put people before IVF profits': IVF pioneer Alan Trounson

IVF could be done for hundreds of dollars in Australia instead of $8500 if clinics stopped charging what ''the market will handle'', a pioneer of the technology says.

Expectant parents urged to swap the pub for bub

Nearly one in five women drink while pregnant, but a current campaign is trying to drive down that unhealthy statistic.

Nutella supplies threatened by bad weather

There's bad news for fans of Nutella, the gooey, chocolatey hazelnut spread.

The cost of growing your own vegies

Does it make financial sense to grow your own veggies, or are you better off ordering produce from the local food co-op?

Breastfeeding mums less likely to suffer from PND, but all need support

A new study has shown the a complex relationship between a mother?s intention to breastfeed, her ability to do so, and postnatal depression.

The #loveyourlines Instagram account taking on body issues

A new Instagram account, LoveYourLines, has put the call out for to change the way we view stretch marks.

Mum gets diploma 51 years after being thrown out of school over pregnancy

Sandra Lantz was about six months pregnant and four months from graduation when she was forced to leave high school. Now, more than half a century later, she has finally graduated.

The lowdown on male midwives

How would you feel about having a male midwife assist your baby's birth? For a growing number of mums, the idea is a reality - and the experts all agree that it's something that should be encouraged.

Bomb threat at daycare centre

Worried parents took to social media yesterday after their children's daycare was evacuated due to a bomb threat.

Unusual celebrity baby names

Celebrities love to use their imaginations when it comes to naming their kids! Here's a gallery of some of the most memorable monikers in show biz families.

5 fears I've overcome since becoming a mum

Motherhood has a way of putting any phobias you had pre-parenthood into perspective: you either realise they?re a pointless waste of energy or they simply vanish in a sleep-deprived haze.

Win back some precious time and get FREE coupons

Membership to eBay's Bubs? Corner is free and includes a $10 coupon to spend on nappies each month - a win for multitasking mums!

Download now: Essential Kids Activity Finder app

Got bored kids? Quickly find the best activities for kids wherever you are in Australia with the Essential Kids app.

 
Advertisement
 
Advertisement
 
 
 

What's hot on EB

Win back some precious time and get FREE coupons

Membership to eBay's Bubs? Corner is free and includes a $10 coupon to spend on nappies each month - a win for multitasking mums!

Do you suffer from Precious Firstborn Syndrome?

Testing ?no more tears? shampoo in your own eyes, warming cucumber sticks so they're not cold straight from the fridge, waking a sleeping baby to check they?re still breathing: these are all symptoms of Precious Firstborn Syndrome.

Ezra's tragic death not in vain, mum says

Little Ezra was a "Harry Houdini" who loved trying to escape the family home. Now, after his tragic death, his parents are doing what they can to help others.

7 mistakes old hands make with new babies

As I sat across the table from my friend ? me, a seasoned mother of three; her, a brand new mum ? I thought of all the mistakes an old-hand parent can make when visiting a newborn baby.

Video: When adults act like children

Ever wondered what would happen if adults were allowed to act like children? This dad's hilarious video clip will give you an idea of what life would be like.

Mums hit hardest as flu cases skyrocket

The number of confirmed cases of influenza in Australia has doubled the number for the same time last year - and women are 25 per cent more likely to get it.

The mum who had four babies in nine months

Feeling exhausted due to the demands of caring for a baby? Imagine the life of this mum, who gave birth to three boys and one girl in just nine months.

Everything baby at Big W

Lowest prices on everything baby, only at Big W. Sale starts August 4 and ends August 20 2014.

Smiggle is painting the town red!

We have 3 Red Smiggle prize packs to give away! Enter by posting a photo of something red to your Instagram.

Going viral

Mum gives birth at school

A video of a three-year-old taking the ice bucket challenge has gone viral, but many aren't impressed.

Personalised baby gifts

We've scoured the internet to find gorgeous personalised keepsakes and nursery decor to record baby name and dates. They make great gifts for christenings, name days and birthdays! (All prices in AU.)

 

Mind, body, beauty, life

Making time for me

We look at your wellbeing, covering health, relationships, beauty and fashion, mind and body.

 
Advertisement
 
 
Essential Baby and Essential Kids is the place to find parenting information and parenting support relating to conception, pregnancy, birth, babies, toddlers, kids, maternity, family budgeting, family travel, nutrition and wellbeing, family entertainment, kids entertainment, tips for the family home, child-friendly recipes and parenting. Try our pregnancy due date calculator to determine your due date, or our ovulation calculator to predict ovulation and your fertile period. Our pregnancy week by week guide shows your baby's stages of development. Access our very active mum's discussion groups in the Essential Baby forums or the Essential Kids forums to talk to mums about conception, pregnancy, birth, babies, toddlers, kids and parenting lifestyle. Essential Baby also offers a baby names database of more than 22,000 baby names, popular baby names, boys' names, girls' names and baby names advice in our baby names forum. Essential Kids features a range of free printable worksheets for kids from preschool years through to primary school years. For the latest baby clothes, maternity clothes, maternity accessories, toddler products, kids toys and kids clothing, breastfeeding and other parenting resources, check out Essential Baby and Essential Kids.