Jump to content

Salary sacrifice for car questions


  • Please log in to reply
20 replies to this topic

#1 Crap Napper

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 Crap Napper

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 VeritasVinum

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

 

What you need to know about ovulation tests

Most people who are trying to get pregnant know that the best time to conceive is in the few days after ovulation.

Surviving a miscarriage at sea

A cruise with your family is among the most absurd settings for a miscarriage, but it is certainly not the worst.

Mum of three denied tubal ligation because she's 'too young'

A 22-year-old woman who is pregnant with her third child has had her requests for a tubal ligation denied because doctors believe she is too young.

Slapped cheek syndrome a danger for pregnant women

When a pregnant woman is infected, the likelihood that her foetus will be infected is about 50 per cent.

The signs and symptoms of ovulation

If you're hoping to conceive, one of the most important things you need to know about is ovulation.

We all know 'mum guilt' - but what about 'dad guilt'?

I remember the first time I felt mum guilt, within days of having my first child. The feeling was so intense I rang my own mum to debrief, hoping she'd tell me I wouldn't feel this way very often.

Kristen Bell urges mums to be their own superhero

When it comes to motherhood, actress Kristen Bell is her own superhero and she thinks other mums should be too.

Pram review: GB Pockit travel stroller

In a world of ever-shrinking gadgets, it's no surprise prams are getting smaller. We put the record-holding GB Pockit through its paces.

The beautiful Bombol Bouncer is back

The gorgeous Bombol Bouncer is back - and boasts two chic new colours to boot.

Gadgets and accessories for wine lovers

Looking for a gift for the wine lover in your life - or just something for yourself?

Free ticket offer

Pinky Mckay joins us again at the Essential Baby & Toddler Show presented by Blackmores with her expert baby settling advice. Register now for your free ticket.

The adventure doesn't have to stop: here's how to travel with baby

The best part about our outdoor adventures? It makes my husband and I better parents, since we're happier while adventuring.

Woman crashes car to save mum and baby's life

A good samaritan saved a mother and baby from being seriously injured by crashing her own car into theirs.

Should you tell your boss about your postnatal depression?

Returning to work after having a baby can be daunting, and when you're experiencing postnatal depression or anxiety it can seem even more overwhelming.

TV noise can slow toddler word learning, study finds

Background noise from the radio or TV might be making it harder for your toddler to learn learn new words.

Teresa Palmer on her molar pregnancy and 'unsexy' conception

Teresa Palmer is basking in pregnancy glow as she awaits the arrival of her new baby.

 
Advertisement
 

Top 5 Articles

Advertisement
 
 
 

What's hot on EB

For the festival lover in all of us

Pre-book & Save 50%. Get your tickets now for Kidtopia Festival. 7-9 October 2016 Parramatta Park, Sydney.

Why drinking water can be deadly for babies

H2O is one of the necessities of life, but for babies a seemingly harmless amount of water can be fatal.

5 ways having a baby is different when you have older children

So much parenting advice is geared towards having your first baby, but what's it like having a baby when you already have children?

You can now make your own plush Falkor

Fans of The NeverEnding Story – of which there are certainly plenty – went crazy for these plush Falkors when they first went on sale last year.

Baby steps

10 things that will actually happen after having a baby

I thought I had prepared myself for motherhood. Then my baby girl arrived and knocked everything flat.

Having a baby: expectations vs reality

People love to warn you about what to expect when having a baby, but they can be way off when it comes to the reality.

Are we having fun yet? Thinking positively as a parent

Motherhood is wonderful ... except when it sucks.

The adorable smile of a baby seeing his mum clearly for the first time

There is no doubt seeing their child smile for the first time is an unforgettable moment for parents everywhere.

When breastfeeding doesn't go with the flow

Breast is best, except when it's not. And in our case, it most definitely wasn't.

'If you don't vaccinate your kids you're a bloody idiot'

The photos are heartbreaking and almost too difficult to look at, but Kayley Burke is begging other parents to take notice.

Why pregnant women should eat chocolate

In news that will make expectant mums jump for joy - and reach for a block of Cadbury - scientists have revealed chocolate could provide health benefits during pregnancy.

The baby born with an incredible head of hair

If you're in any way challenged in the follicle department, prepare to feel a jolt of envy - at a two-month-old baby.

The push for Medicare to fund lactation consultants

While meeting with a lactation consultant can make an enormous difference to a new mother, it's not a service that is available through the public health system.

Parents, this is how to cut grapes to avoid choking

One mum has learnt a harrowing lesson about the best way to cut grapes to make it safe for toddlers and little kids to eat.

Three truths about C-section mums

Lately I've been thinking about the caesarean stories and the brave women who birth their children with strength and beauty.

Help! My baby will only sleep in my arms

It's stressful to be the one who is holding your baby most of the day, but it's even more stressful to wonder, 'am I doing something wrong? Or am I creating bad habits?'

 

Free ticket offer

Essential Baby & Toddler Show - Sydney

The Essential Baby & Toddler Show, presented by Blackmores, will be held in Sydney on 23-25 September. Register for your free ticket now to save $20!

 
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.