SALARY SACRIFICE - THE KEY TO paying LESS TAX. Keep more of your income.

Summary

This video script discusses salary sacrificing and salary packaging in Australia, explaining how these arrangements can legally reduce income tax. Salary sacrificing involves directing pre-tax income towards superannuation, benefiting from a lower tax rate of 15% compared to the standard income tax rates. Salary packaging, on the other hand, allocates pre-tax income to fringe benefits like a debit card, tools, or school fees, which can also lead to tax savings. The script advises viewers to consult with employers and accountants to understand the tax implications and benefits of these options.

Takeaways

• 💰 Salary sacrificing and salary packaging are legal methods to reduce the tax you pay on your income.
• 🇦🇺 The video is the final part of a series discussing employment and taxes in Australia, specifically salary sacrificing and salary packaging.
• 🔄 Salary sacrificing involves making extra contributions to your superannuation (retirement fund) from your pre-tax income.
• 🛠️ Salary packaging is related to allocating part of your pre-tax income towards other fringe benefits, such as mortgages, rent, or car loans.
• 📊 Superannuation contributions are taxed at 15%, which is typically lower than the marginal tax rate on regular income.
• 🔄 The difference between salary sacrificing and salary packaging lies in the type of benefits: superannuation versus other fringe benefits.
• 💳 Some employers offer a debit card for salary packaging, which can be used for purchases, but it does not allow cash withdrawals.
• ⚖️ It’s important to check if fringe benefits attract a Fringe Benefit Tax, as it could affect the amount you receive.
• 💼 Consulting with an accountant or employer is advised before opting into salary sacrifice or salary packaging.
• 🧮 The potential tax savings from salary sacrificing can be significant, often resulting in thousands of dollars saved annually.

Q & A

What is the main topic discussed in the video script?

The main topic discussed in the video script is salary sacrificing and salary packaging as methods to legally reduce the tax paid on income in Australia.

What is the difference between salary sacrifice and salary packaging according to the script?

Salary sacrifice involves using part of your pre-tax income for superannuation contributions, while salary packaging involves using part of your pre-tax income for other types of fringe benefits.

What is the purpose of salary sacrificing into superannuation?

The purpose of salary sacrificing into superannuation is to build up your retirement fund more quickly and to reduce the tax you pay on that portion of your income, as superannuation is taxed at a lower rate than regular income.

What is the tax rate applied to superannuation in Australia?

Superannuation in Australia is taxed at a rate of 15%, up to a certain cap.

How does salary sacrificing reduce the amount of tax paid on income?

Salary sacrificing reduces the tax paid on income by lowering the gross amount subject to taxation and by contributing to superannuation, which is taxed at a lower rate than regular income.

What are some examples of fringe benefits that can be included in a salary package?

Examples of fringe benefits that can be included in a salary package are mortgage payments, rent, car loans, tools and equipment, school fees, and laptops.

Why might an employer reduce the amount given in a salary package?

An employer might reduce the amount given in a salary package to offset the fringe benefit tax they are liable for in relation to the fringe benefits chosen by the employee.

What is the potential savings from salary sacrificing according to the script?

According to the script, the potential savings from salary sacrificing can be nearly $5,000.

Is it possible to access physical cash through salary sacrificing or salary packaging?

No, physical cash cannot be accessed through salary sacrificing or salary packaging. For example, a debit card provided through salary packaging cannot be used to withdraw cash from an ATM.

What advice does the script give for someone considering salary sacrificing or salary packaging?

The script advises having a conversation with your employer and consulting with an accountant before opting into salary sacrificing or salary packaging to ensure you understand the implications and potential tax savings.

What is the presenter's disclaimer regarding their expertise in the video script?

The presenter's disclaimer is that they are not an accountant or a financial expert, and they are providing basic knowledge on the topic to help viewers understand the concepts.