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Salary sacrifice for car questions


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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.





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