A salary sacrifice arrangement is also commonly referred to as salary packaging or total remuneration packaging. It is an arrangement between you and your employer, whereby you agree to forgo part of your future entitlement to salary or wages in return for your employer providing you with benefits of a similar value.
The requirements of an effective salary sacrifice arrangement are:
• The arrangement is entered with your employer before you perform the work
• There is an agreement between you and your employer
• There should be no access to the sacrificed salary – if a fringe benefit that has not been provided by your employer is cashed out at the end of a salary sacrifice arrangement accounting period, the amount cashed out is your salary and is taxed as normal income
There is no restriction on the types of benefits that you can sacrifice. The important thing is that these benefits generally provide in a salary sacrifice arrangement by an employer include fringe benefits (commonly includes cars, property and expense payments), exempt benefits and superannuation.
Your salary sacrifice arrangement may include the provision of expense payment fringe benefits to you. An expense payment fringe benefit arises where you incur the expense and your employer either reimburses you for the expense or pays a third party for the expense on your behalf. For example, your health insurance premiums are reimbursed by your employer.
If you require assistance with salary sacrifice or have any questions in relation to tax, our professional lawyers and experienced accountants can assist you. Visit our website and submit an online enquiry or contact us on 1300 784 667 (1300 QUINNS) or on +61 9223 9166 to arrange an appointment.