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.





3 user(s) are reading this topic

0 members, 3 guests, 0 anonymous users

 

Share the little things that make you smile

We're giving away a Mountain Buggy nano, the ultimate travel stroller - and here are some of the great entries so far.

Toddler pleads for return of "stolen" nose

A two-year-old's reaction to a game of "got your nose" shows it doesn't take much to make a toddler cry.

The 15 photos new parents share (and five they don't)

From the first scan photo to the baby covered in cake at their first birthday party, there are 15 photos most parents seem to share - and some they don't.

Doctor sings first Happy Birthday to newborns

His job is to deliver babies, but this US obstetrician also has a unique way of celebrating the miracle of life.

Breastfeeding friendly café goes viral

A photo of a breastfeeding-friendly sign in a cafe has been posted to Facebook and shared by hundreds of mums around the world.

First look at the Bugaboo Bee3

The newest Bugaboo Bee ? the Bee3 ? offers a variety of improved features, including a much asked-for bassinet and a rainbow of colour combinations.

Childcare costs, not paid leave, the real issue for parents

Given the choice between maintaining their wage for six months to have a child, or having a reduced rate of pay for a time but a better deal on childcare when returning to work, there are no odds on what most working parents would choose.

Win a Mountain Buggy nano

We?re giving away the new Mountain Buggy Nano - the lightweight travel buggy! So show us the little things that make you smile for your chance to win.

We lost three babies in two years

Our first pregnancy ended the way we all expected it to - with a healthy, happy baby in our arms. What a true blessing he was, for we were not to know the heartache we were about endure.

Family turned back from doomed flight MH17

'There must have been someone watching over us and saying, 'You must not get on that flight,' says mother who narrowly avoided boarding the Malaysian Airlines flight which exploded in mid-air over the Ukraine last night.

The myths and facts about "normal" breastfeeding

When it comes to successful breastfeeding, there is a wide variety to what is "normal", according to new research.

Adorable Skeanie loafers for kids

Your little toddler or preschooler can now get their nautical on with a new range of classic loafers by Australian show brand Skeanie.

My baby is hypermobile

For months, I have been telling myself not to worry that Jasmin isn't crawling or walking. This week I heard the term hypermobile for the first time.

When you don?t bond with your baby

They say that there is no bond greater than the bond between a mother and her child. But for some women, the mother-baby bond takes more time and effort to develop.

Yumi Stynes: Having a baby after a 10-year break

After a long break, Yumi Stynes gets a reminder of the pain - and the pleasure - of giving birth.

Grieving father asks for help to Photoshop his daughter's image

When Nathan Steffel's daughter Sophia died from a liver condition at just 6 weeks old, he reached out for someone to create a beautiful image of his little girl.

Raising kids in a 'low media' home

Can you imagine a life without TV or computers? Some parents are opting for a low-tech, screen-free life for their kids.

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 a Mountain Buggy nano

We?re giving away the new Mountain Buggy Nano - the lightweight travel buggy! So show us the little things that make you smile for your chance to win.

Be careful what you say, your baby is listening

The importance of speaking to your baby even if they are not old enough to answer back has been highlighted by new research.

The beautiful moment a baby was born at the side of a road

It's not where she expected to give birth, but mum Corrine Cinatl is delighted that her daughter's roadside arrival was captured in a series of beautiful photos.

Doctor sings first Happy Birthday to newborns

His job is to deliver babies, but this US obstetrician also has a unique way of celebrating the miracle of life.

The Nappy Collective starts new drive

It's that time of year when the dedicated volunteers at The Nappy Collective do their bit to help out mums and children in need - and they need your help.

Baby shower cake wrecks

From misshapen cake babies to questionable text, from odd colour choices to internal organ recreation, these are the baby shower cakes that taste forgot.

Photographer captures the beauty of adoption

The love of a family is usually tough to capture on camera. This is an exception.

Pregnancy progression photo ideas

Want to record your pregnancy as your belly grows? Here are some creative, fun ideas for photo shoots along the way.

The myths and facts about "normal" breastfeeding

When it comes to successful breastfeeding, there is a wide variety to what is "normal", according to new research.

Tin can craft and DIY ideas

Got a few old formula, Milo or coffee cans around the house? Use these fantastic upcycling ideas to create items for around the house and yard.

Dads meet their newborn for the first time

Emotional photos of two fathers meeting their newborn son have resonated with viewers worldwide, attracting thousands of Facebook likes and shares.

Skin safety isn't just a summer worry

Lax about the slip slop slap with your kids as weather turns cooler? Here's a reminder as to why we have to remain vigilant for our children?s future health.

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.)

Creative sleeping baby photoshoots

See how some parents and photographers have captured sleeping babies in unusual positions and using different props.

DIY kitchen and food hacks

DIY your way to a better kitchen and make cooking easier with our clever hacks. (Some content reproduced with permission from mashable.com.)

Winter warmers for babies and toddlers

Your baby or toddler will be nice and snug in these beautiful and fun winter pieces. Most are hand-made or knitted, and they're all designed to keep your little one toastie - and adorable!

 

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.