Salary Packaging Worked Example – Public and non-profit hospital

Rebecca is nurse employed by a Public and non-profit hospital. She is thus eligible to salary package up to $9,009.96 worth of GST Free fringe benefits per FBT year.

Rebecca has a Mortgage that she would like her salary sacrificed amounts to be paid into.

EXAMPLE

Rebecca is paid a total salary of $50,000 (plus superannuation). The tax Rebecca currently pays on $50,000 is $8,797 (including Medicare levy). This results in Rebecca receiving an after tax cash amount of $41,203 per year from which to pay all her mortgage payments, bills and living expenses etc.

After Rebecca enters in to the salary sacrifice agreement for her mortgage payments, Rebecca’s new taxable salary is $40,991 ($50,000 – $9,009). The tax payable on this amount is $5,689 (including Medicare levy) leaving Rebecca $35,302 in after tax cash.

Since Rebecca is employed by a Public and non-profit hospital, the $9,009 paid in mortgage payments (as fringe benefits) are tax free.

The benefit to Rebecca of salary packaging her mortgage 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 ($8,797- $5,689).

Rebecca’s new total after tax salary package is now worth $44,311 ($35,302+ $9,009).

If Rebecca was not employed by a Public and non-profit hospital, the equivalent gross salary Rebecca would need to be paid to take home $44,311 after tax is $54,746. By salary packaging her mortgage Rebecca has given herself a pay rise equivalent to $4,746 before tax.

This is summarised in the table below:

Public Non profit Hospital 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.