This document discusses recent changes and opportunities regarding salary packaging in Australia. It covers changes to packaging cars, the end of packaging for living-away-from-home allowances, new packaging opportunities such as for public transport and electricity, and monitoring the $25,000 cap on superannuation contributions. The key takeaway is that salary packaging can increase employee incomes and deliver tax savings, but employers must regularly review benefits and ensure compliance with tax rules.

1. Salary Packaging in
2012/13
Cars, Super and LAFHA
Australian Payroll Association

2. Contents
1. Salary Packaging: the basics
2. Cars: managing the 2011 changes in 2012
3. 30 September 2012: the end of LAFHA?
4. Superannuation changes – watch out for the cap!
5. New packaging ideas and opportunities.

3. The Basics – No Packaging
$150 Salary $50 Tax
The ATO ATO’s Bank
ATO’s Bank
The ATO
Account
Account
Employer:
Employer:
$100 Post-tax
$150 Salary
$150 Salary
Employee’s
Employee’s
Employee
Employee Bank Account
Bank Account
$0
$100 Benefit

4. The Basics - Packaging
$50 Salary $16.75 Tax
The ATO ATO’s Bank
ATO’s Bank
The ATO
Account
Account
Employer:
Employer:
$33.25 Post-tax
$150 Salary
$150 Salary
$100 Salary Employee’s
Employee’s
Employee
Employee
$33.25 Bank Account
Bank Account
Salary
Salary
Packaging
Packaging
Account
Account
$100 Benefit

5. The Basics: Benefit Categories
•Cars
•Exempt Benefits
•Otherwise deductible benefits
•Concessional benefits
•Public Hospital/PBI benefits
•In-house benefits

6. Salary Packaged Cars
The 2011 Changes
There are now two categories of car benefit:
•Old (or “Grandfathered”) Vehicles
•Transition Vehicles
Statutory %
2012/13
Annual Kilometers Old Transition
0 – 14,999 26% 20%
15,000 – 24,999 20% 20%
25,000 – 39,999 11% 17%
40,000 + 7% 13%
Transition vehicles moving towards flat 20% rate

7. Salary Packaged Cars
The 2011 Changes
Grandfathered vehicles
•Differing priorities:
–Over 25,000km: Protecting ‘grandfathered’ status is critical!
–Under 15,000km: Losing ‘grandfathered’ status is critical!
But deliberately bringing about new rate is tax avoidance.
•“Commitment Time” dictates result
•New Vehicle
•Refinance of existing vehicle
•Change in employer

8. Salary Packaged Cars
The 2011 Changes
Novated Leases: Annual KM travelled

9. The End of LAFHA?
•LAFHA rules change from 1 October 2012:
–‘Usual place of residence’ must be an Australian address: no more
expats
–Test to be tightened: usual residence must be ‘available’?
–Allowance format to be abolished – reimbursement or tax
deduction
–Result: only a handful of employees will be eligible but LAFHA .

10. New packaging opportunities
•In-house benefits are all the rage:
–Public Transport
–Electricity
–Water Rates?
•Relocation benefits: replacement for LAFHA?
–Temporary accommodation
–Home sale and purchase
costs
–Removal, transport and
travel costs

11. Superannuation
•It’s all about the ‘cap’
•$25,000 - all employees
•Includes SGC amounts (except some defined benefit State funds)
•Whose responsibility is it to monitor?
•Are we moving to a 12% SGC rate?

12. Going forward . . .
•Public Hospitals & Charities: NFP Tax Concession Working Group
•Cars: Transition to 20% flat rate finishes on 1 April 2014
Takeaway
Salary packaging remains an effective way to increase employee effective
incomes and to deliver substantial tax savings
Employers should regularly review their benefit menu to ensure:
1.employees are offered a full range of salary packaging opportunities; and that
2.those opportunities comply with the latest tax rules and conditions.