Pack Facts: Your Salary Packaging Questions Answered

The Australian Taxation Office (ATO) has stated that payment by an employee of an initial lease payment or any subsequent lease payment can not be reimbursed as part of a salary package without being subject to FBT. This is due to these payments not adequately meet the definitions required under the FBT Act.

Therefore, Remunerator will not reimburse lease payments made directly by employees, unless instructed to do so in writing by the employer.

Disclaimer: The information supplied on this page is provided as an information guide only. It contains Remunerator (Aust) Pty Ltd ACN 074 423 966 interpretation of the current tax legislation which is subject to change at any time without notice and should not be relied on as a substitute for legal or other professional advice.

In certain circumstances, your salary package may have 27 deductions taken in the FBT year. In this instance, to continue to keep deductions and payments the same, Remunerator force a 'GAP' in your package.

To facilitate this, we liaise with your payroll to:

1. Stop the deduction that is usually taken in the last pay period in the FBT year
2. Recommence taking deductions in the new FBT year

What does this mean for my tax savings?

Don't worry, you will still receive the maximum threshold you are entitled to or the amount you have instructed us to salary sacrifice for you. The calculated tax savings are exactly the same regardless of the number of pay periods you salary package.

Missed Deduction

There are many reasons why a deduction might not be taken from your pay including, but not limited to:

• Leave without pay
• Payroll not having enough time to process the deduction request for that pay period
• Your fortnightly pay may not have been enough to cover the deduction
• Time sheets not given to your payroll in time

What should I do if I think I have missed a deduction?

First, check your pay slip, if there has not ben the expected amount allocated to your salary sacrifice then you have most likely missed a deduction.

There are a few options now available to you:

1. A double deduction from next pay
   • In doing this, you will still have the maximum entitlement and the full amount that you budgeted for. To take up this option please email us at service@remunerator.com.au with your name, package number, and the instruction to take a double deduction next pay. We will then liaise with your payroll to make this happen.
2. Do nothing
   • If you do not want or can't afford a double deduction in the next pay and don't mind the missed payment then we will just leave the package as is and wait for the next deduction taken to re-commence payments. This option means that you will not receive your full entitlement.
3. Repackage
   • This way we can recalculate your package to a more suitable budget.

What if I miss more than one deduction or take leave such as maternity or leave without pay?

In this case, you will need to repackage. If you are expecting to miss several deductions or are going on an extended leave-without-pay arrangement we need to be advised in advance so that we can suspend your package accordingly. When you return to work please email us at service@remunerator.com.au and we will have the package re-started for you.

Please note that there is a fee charged for repackaging.

Employers are required to record the value of fringe benefits provided to each of their employees. This is referred to as your Reportable Fringe Benefits (RFB) and may appear on your payment summary each year.

The amount that appears on your payment summary will be for the FBT year ending 31 March.

The amount recorded in the RFB tax box is not used to calculate your income tax liability. However, it can be included in a number of income tests relating to government benefits and obligations such as child support payments, Medicare Levy, HECS repayments and superannuation surcharge.

Please note: Where an individual's fringe benefits amount is $2,000 or less, there is no requirement for the employer to report the amount on the employee's payment summary.

With novated leasing, employees are able to pay for vehicle running costs from their take-home pay. This can reduce the amount of Fringe Benefits Tax (FBT) payable.

Remunerator offers the Employee Contribution (EC) method as an option for packaging a Novated Motor Vehicle using the Statutory Method of calculating FBT.

The EC is set to equal the budgeted FBT value so that no FBT is payable, provided the vehicle travels the budgeted kilometers for the period.

The EC does include GST, which is paid to the employer and funded by the employee’s Salary Deductions.

How does it work?

The Employee Contribution is a post-tax deduction from the employee’s salary and is used to fund the employee’s running costs (eg. fuel, registration, and insurance) and therefore reduces the pre-tax cost of packaging the vehicle.

The definition of ‘log book records’ is to be found in sub-section 136(1) of the FBTAA. The definition is as follows:

“log book records, in relation to a car held by a person (in this definition called the holder), in relation to a period, means a daily log book or similar document in which, in respect of each business journey:

1. that is undertaken in the car during the period; and
2. that the holder, or a person acting on behalf of the holder, chooses to record in the document for the purpose of demonstrating the pattern of use of the car during the period; an entry setting out particulars of:
3. the date on which the journey began and the date on which it ended; and
4. the respective odometer readings of the car at the beginning and end of the journey; and
5. the number of kilometres travelled by the car in the course of the journey; and
6. the purpose or purposes of the journey;

is made in the English language at, or as soon as reasonably practicable after, the end of the journey.”

The ATO also has advised that if information relating to the log book travel is held in two different sources, this will satisfy the ATO requirements, providing that each requirement included in the definition of ‘log book records’ is satisfied by either or both of those sources. Employers using separate items to record information would need to ensure that both information sources are retained for the required record keeping period.

All taxpayers currently pay a 2.0% Medicare levy which is deducted with your fortnightly tax and applies to your total gross salary.

For taxpayers who do not have any private health insurance (patient hospital cover) and an income in excess of specified thresholds, they are subject to a Medicare Levy Surcharge (MLS).

When you salary package, the amount the MLS is calculated on is adjusted to take into account the benefits you are receiving. After salary packaging, the amount the MLS is calculated on is the sum of:

• Your taxable income; plus
• Your total reportable fringe benefits

If this sum makes you subject to the MLS, you will be advised of any surcharge payable when you receive your notice of assessment from the Australian Taxation Office.

Reimbursements are processed in the following steps:

1. You pay for your expenses in person, by phone or electronically
2. You submit your claims online with a photo or scanned copy of your receipts to Remunerator
3. Remunerator processes your claims within 2-days of receipt
4. Remunerator transfers funds from your employer's salary packaging account to your account
5. Funds available in your account 5-days after Remunerator receives your claim

You will only be reimbursed the amount deducted from your salary. You will receive the funds in your account within 5-days of Remunerator receiving your claim.

If you package multiple benefits that are to be reimbursed to you when you submit your claims, the claims are processed and reimbursed in the order they are received.

If you do not have use of your vehicle for a period of time, you may be able to declare unavailability. The employee's FBT liability will then be reduced by any days deemed as being unavailable.

This occurs only when:

• The vehicle must be garaged on company owned or leased premises; and
• The employer removes control of the vehicle from the employee (e.g. holds the keys) and ensures the vehicle is not available for private use by the employee or a family member of the employee; or
• The vehicle is being repaired and you do not have access for at least a 24-hour period.

Conditions:

• Unavailability cannot be claimed if the motor vehicle is in safe storage or in long-term car parking (e.g. airport) while the driver is on an interstate or overseas business trip or holiday.
• Unavailability can only be recorded as whole days.

How to log unavailability:

• Login and submit relevant details to your package online

The Australian Taxation Office defines a fringe benefit as a 'payment' to an employee, but in a different form to salary or wages.

FBT is paid by employers on certain benefits they provide to their employees or their employees' family or associates. FBT also applies if the benefit is provided by a third party under an arrangement with the employer.

Employers can generally claim an income tax deduction for the cost of providing fringe benefits and for the FBT they pay. Employers can also generally claim GST credits for items provided as fringe benefits.

For further information, talk to our customer service team on 1300 654 834 or visit the ATO website here.

Fringe Benefits Tax (FBT) is separate to income tax and is calculated on the taxable value of the motor vehicle.

FBT is charged on all motor vehicles included in your salary package over the FBT year (1 April - 31 March).

The ATO requires using the statutory method to calculate FBT on your motor vehicle. The following formula is used:

FBT Payable = Purchase Price * Statutory Rate * Gross Up Factor * FBT Rate

For further information on FBT and your motor vehicle, talk to our novated leasing specialists on 1800 501 703 or novated@remunerator.com.au.

Salary packaging can affect your HELP or student loan repayments each year. Contact Remunerator's team on 1300 654 834 or at service@remunerator.com.au for more information on your personal circumstances.

When you Salary Package, the benefit you receive will be reported on your Payment Summary (formerly called your Group Certificate).

The items you include in your Salary Package will appear in your Reportable Fringe Benefits (RFB). Your RFB is made up of the actual amount of benefit you received, plus the Fringe Benefits Tax that would have been payable on that benefit. For an explanation of RFB including how it is calculated on your payment summary.

The Australian Taxation Office (ATO) considers the following as HELP repayment income:

• Your taxable income for an income year;
• Any amount your taxable income has been reduced by a net rental loss;
• Your total reportable fringe benefits amounts shown on your Payment Summary.

You need to advise your Pay Office to calculate your HELP on your total estimated income, including your RFB. To do so, you should complete an ATO form called Withholding Declaration Upwards Variation and supply it to your Employer. This can be obtained from the ATO website.

By salary packaging, you can effectively save on GST.

When you package a benefit that attracts GST, your employer will receive a credit for the GST paid from the Australian Tax Office (ATO). This credit is referred to as an Input Tax Credit (ITC). After receiving the ITC, your employer will pass back the ITC to you through your salary package.

The full amount will be paid for the benefit, however the amount less GST will be charged to your package.

ITCs can be passed back for most items where GST is payable such as:

• Most work related expenses: Briefcases, iPad / tablet / laptop / notebook computers, professional subscriptions
• Motor vehicle expenses: Motor vehicle leases, petrol and repairs
• Utilities: Electricity, gas, telephone
• House insurance 
• Public transport
• Other general expenses 
• Even your Remunerator fees!

You can track the ITCs passed back by your Employer with your Remunerator Employee Statement.

Entertainment can only be claimed if you are the person that paid for the meal or venue accommodation and no amount has been reimbursed from another source, i.e. each person paying their share.

The types of expenses you can claim are:

• Any restaurant meals/alcohol consumed on the restaurant premises including hotels & cafes;
• The catering costs to a professional firm or reception centre where the sole or dominant purpose is the consumption of food and drink;
• Take away meals where the business has dine-in facilities;
• Meals whilst on holiday

To submit a reimbursement claim you must provide evidence of the purchase in the form of invoices or receipts at the time of each claim during your package or invoices or receipts up to 12 months old can be provided with your application. Please note eftpos dockets, itineraries and bank statements can not be accepted.

What can be included?

• Meals only
• Meals and Drinks combined
• Take Away Outlet meals where the business has dine-in facilities
• Meals whilst on holidays (Australia or Overseas)
• Meals and Drinks supplied by professional caterers eg. weddings, birthdays
• Hotel/Motel accommodation
• Holiday on a cruise ship
• Airbnb

What is excluded?

• Drinks only
• Tips
• Theatre Restaurants
• Theme Park/Concert entry
• Marquees, equipment, seating, band costs associated with professionally catered functions
• Purchases from supermarkets, grocery food stores and bottle shops
• Snack foods
• Drinks only, where there is no meal consumed
• Equipment or seating hire
• Flights
• Taxis, hire cars
• Uber