Can my Employees Salary Package?
All employees Australia wide have the ability to salary package as long as they enter into an effective salary sacrifice agreement and the employer pays the appropriate amount of Fringe Benefits Tax (FBT).
The difference for Not For Profit Organisations is that some are registered with the Australian Taxation Office as a Public Benevolent Institution (PBI) or Health Promotion Charity (HPC).
PBI's and HPC organisations are able to allow their employees to salary package up to $16,050 worth of benefits without incurring any FBT. This means that the employees of PBI's have the potential for significant tax savings through salary packaging that are not available to employees who work for 'for profit' organisations. These employees have the potential to save money by packaging everyday living expenses such as loan payments, rental payments, credit cards and other general living expenses such as groceries, electricity, telephone bills, rates, etc.
Other organisations are categorised as a Public or Private Hospital. These organisations can allow their staff to salary package up to $9,094 without incurring any FBT.
Still other organisations are classified as Rebateable Organisations and are able to allow their employees to salary package up to $16,050 worth of benefits and pay a reduced amount of FBT. This means that employees working for rebateable organisations can make some good saving by packaging motor vehicles, exempt items and for those staff who earn more than $ they can save money packaging everyday living expenses as outlined for PBI employers.
What is a Public Benevolent Institution (PBI)?
A public benevolent institution (PBI) is a non-profit institution organised for the direct relief of poverty, sickness, suffering, distress, misfortune, disability or helplessness.
The characteristics of a PBI are:
- it is set up for needs that require benevolent relief
- it relieves those needs by directly providing services to people suffering them
- it is carried on for the public benefit
- it is non-profit
- it is an institution, and
- its dominant purpose is providing benevolent relief.
Examples of PBIs are non-profit organisations that:
- provide hostel accommodation for the homeless
- treat sufferers of disease
- provide home help for the aged and the infirm, or
- rescue people who are lost or stranded.
What is a Rebateable Organisation?
Rebatable employers are entitled to have their liability reduced by a rebate equal to 48% of the gross FBT payable (subject to a $30,000 capping threshold). If the total grossed-up taxable value of fringe benefits provided to an employee is more than $30,000 a rebate cannot be claimed for the FBT liability on the excess amount.
Charities must be endorsed by the Tax Office in order to access the FBT rebate.
Rebatable employers are certain non-government, non-profit organisations. Organisations that qualify for the FBT rebate include:
- certain religious, educational, charitable, scientific or public educational institutions
- trade unions and employer associations
- non-profit organisations established to encourage music, art, literature or science
- non-profit organisations established to encourage or promote a game, sport or animal races
- non-profit organisations established for community service purposes
- non-profit organisations established to promote the development of aviation or tourism
- non-profit organisations established to promote the development of Australian information and communications technology resources, and
- non-profit organisations established to promote the development of the agricultural, pastoral, horticultural, viticultural, aquacultural, fishing, manufacturing or industrial resources of Australia.
Is my organisation registered as a Public Benevolent Institution (PBI) or a Rebateable Organisation?
You can check your organisation's registration status on the Australian Business Register Website. This can be found at http://www.abr.gov.au/ . You will also be able to check to see whether your organisation has other concessions such as the GST concessions for charities.
What it the advantage of allowing my staff to salary package?
Allowing your staff to salary package helps to enable your organisation to become an employer of choice. This is because your staff can receive significant tax savings through the salary packaging exemptions.
This has the effect of increasing your staff's equivalent gross pay to achieve the same take home pay due to the tax savings.
How long does it take to commence a salary packaging system in my organisation?
The Governments classification of your organisation will effect various tax issues surrounding its organisation. If your organisation already has PBI / HPC / Hospital or Rebateable status setting up salary packaging can be very quick.
Depending on your organisation's size, salary packaging can be setup for your staff in as little as 2-3 weeks.