SFSS debts & Salary Packaging

How does Salary Packaging affect me if I have a SFSS debt?

If you are salary packaging with your employer and you have a Student Financial Supplement Scheme (SFSS) debt it is important that you understand that your income for SFSS repayment purposes will increase.  This means you may end up paying more in SFSS as a result of salary packaging.

Your SFSS Repayment Income is the combined total of your taxable income, reportable fringe benefits (as reported on your PAYG Payment Summary), total net investment losses (which includes net rental losses), reportable super contributions and any exempt foreign employment income amounts.

 

EXAMPLE:  Luke has an annual Gross Income of $45,000 and currently has a SFSS debt. Luke is employed by a Public Benevolent Institution and is currently salary packaging $15,899 onto the Community Salary Packaging General Expenses Card.

To calculate Luke’s SFSS Repayment Income he therefore needs to do the following:

Note: The Reportable Fringe Benefit Amount (RFBA) is calculated by multiplying the amount spent on Luke’s General Expenses Card by 1.8868 (i.e. $15,899 x 1.8868) as per the ATO’s formula.

How much SFSS will Luke pay?

Before salary packaging Luke’s repayment income would be $45,000.  This means he would not need to repay any SFSS for the year as his repayment income is below the $54,869 threshold where SFSS repayments commence.

After salary packaging Luke will now be liable for a SFSS repayment based on an income of $59,101.

Luke’s SFSS liability will be $2,364.04 ($59,101 x 4.0%).

See the table on the right to work out the repayment %.

Luke will now need to make a payment to the Australia Taxation Office (ATO) for the $2,364.04 when he lodges his tax return.

SFSS repayments will not automatically be taken out of Luke’s salary by his employer as his taxable income is only $29,101 and well under the SFSS Repayment Threshold of $54,869.

Luke needs to either budget for the $2,364.04 payment when he lodges his tax return OR may decide to inform his employer to voluntarily deduct additional tax each pay day to cover the shortfall.

 

DISCLAIMER: This information is designed to assist you to understand the implications of salary packaging, however it is not to replace appropriate and individualised financial advice.  Community Salary Packaging takes no responsibility for the way you apply this information to your personal circumstances.