Salary Packaging Worked Example – Public ambulance service

Harry is currently employed by a Public ambulance service. He is thus eligible to salary package up to $9,009.96 worth of GST Free fringe benefits per FBT year.

Harry would like to salary sacrifice his rent payments.

EXAMPLE

Harry is paid a total salary of $65,000 (plus superannuation). The tax Harry currently pays on $65,000 is $13,972 (including Medicare levy). This results in Harry receiving an after tax cash amount of $51,028 per year from which to pay all his rent payments, bills and living expenses etc.

After Harry enters in to the salary sacrifice agreement for his rent payments, Harry’s new taxable salary is $55,991 ($65,000 – $9,009). The tax payable on this amount is $10,864 (including Medicare levy) leaving Harry $45,127 in after tax cash.

As Harry is employed by a Public ambulance service, the $9,009 paid in rent payments (as fringe benefits) are tax free.

The benefit to Harry of salary packaging his rent is the difference between the tax paid on the original salary versus the tax paid on the reduced packaged salary. This amount is $3,108 ($13,972 – $10,864).

Harry’s new total after tax salary package is now worth $54,136 ($45,127 + $9,009).

If Harry was not employed by a Public ambulance service, the equivalent gross salary Harry would need to be paid to take home $54,136 after tax is $69,746. By salary packaging his rent Harry has given himself a pay rise equivalent to $4,746 before tax.

This is summarised in the table below:

Public Ambulance Service Example

 *These calculations do not consider the  effect of Salary Packaging on Medicare Levy Surcharge, HECS / HELP Payments,  Centrelink Benefits, Family Tax Benefits etc.  The calculations do not take into consideration any salary packaging administration fees or employer – employee saving split schemes. It is recommended you receive  appropriate and independent financial and taxation advice before deciding to commence salary packaging.