Download Example of Grossing Up Fringe Benefits Tax

Salary Packaging Policy and Procedure
Note: The awards referred to in this document are the (Name) Award and (Name) and
(Name) (state) Award.
Background
The Australian Tax Office declares that a fringe benefit includes any right, privilege, service
or facility (personal benefit) provided to an employee other than in the way of wages. As
(Company Inc) has the status of a Public Benevolent Institution, it is exempt from the
payment of Fringe Benefits Tax on any legitimate fringe benefits to its employees.
Salary packaging involves the payment of a core financial benefit with a variable proportion
to be given as fringe benefits. Salary sacrificing refers to the non-cash (fringe benefits)
component of the employee’s salary, which is deducted before calculating tax to be paid.
Principles

Salary packaging is allowable under the award and there is no restriction in the
award as to the amount of salary you may package. However, there is currently a
capping threshold of $30,000 grossed-up taxable value for each employee of Public
Benevolent Institutions. This equates to $16,042 base salary that may be sacrificed
in one Fringe Benefits Tax year. The FBT year operates from 1st April to 31st March.

All permanent staff (full and part time) are currently eligible for salary packaging

(Company Inc) reserve the right to review, alter or discontinue salary packaging in
the event of changes in relevant taxation or legislation, award conditions or
(Company Inc)’s Fringe Benefits Tax exemption.

The employee may at any time elect to cease salary packaging provided a request is
given in writing.

Superannuation, leave loading and Worker’s Compensation declaration of actual
payments of gross wages will be based on the employee’s base salary ie before the
fringe benefit is deducted.

(Company Inc) employees must read and sign the Salary Packaging Participation
Agreement before salary sacrificing can begin.

(Company Inc) reserves the right to charge an administration fee to cover any
additional costs that may arise as a result of administering salary packaging.

At no time will direct cash payments be made to employees as an option for salary
packaging.
Fringe Benefits
To simplify the administering of the salary packaging, the following types of private
expenditure incurred by the employee are classified as an approved expense to be included
in the agreement:
 Personal Loans
 Mortgage Payments
 Private Rent
 Insurance
 HECS
 Childcare (not provided by the employer)
 Private travel
 Utilities
 Club Memberships (not work related)
 Any other personal expenses that do not come under the following category.
The following items my not be included in salary packaging
 Care expenses
 Work-related expenses which you can claim as a tax deduction
 FBT exempt items:
Notebook/laptop computer
Employer provided childcare
Airport lounge membership
Briefcase
Mobile ohones mainly used for business
Superanuation
Administration
The (Company Inc)’s Salary Sacrificing package is through the (Bank) and employees must
apply for a Salary Benefit Card with the application forms available from the centre.
Employees will need to supply the Verifying Officer with 100 points of ID as required by the
(Bank).
The current Verifying Officer is (name) and this person’s duties include:
 Obtaining current balances and account information on all Salary Benefit Card
recipients
 Obtain Internet Access for view and print only purposed to monitor the transaction
and balances on all card holder accounts
 Authorise the opening and closing of accounts and adding of non-titled members
 Authorise the cancellation of a card for whatever reason and reordering another
 Act as a point of contact for (Bank) staff to discuss charges, issues, transactions, etc
relating to Salary Benefit cards.
Reporting of fringe benefits amounts on group certificates is required.
The reportable fringe benefits total will not be included in your taxable income or affect the
amount of basic Medicare levy you pay, however it will be used to calculate the following:
 Medicare levy surcharge
 Deduction or personal superannuation contributions
 Rebate for personal superannuation contributions
 Rebate for contributions to spouse’s superannuation
 Superannuation contributions and termination payments surcharge
 HECS repayments
 Child support obligations
 Entitlements to certain income tested government benefits
The employee will need to assess how this will affect their situation before deciding
whether to accept salary packaging and how much of their salary to sacrifice. It is
recommended that independent financial advice be sought.
Payment Procedures
Salary Benefit Card -- (Bank) will supply each employee with a Salary Benefit Card. This is in
the form of a Visa card and can be used anywhere a Visa Card is accepted. When using the
care the CREDIT option must be used. The card cannot be used to withdraw cash. The card
cannot be used for B-Pay or you cannot transfer money via the internet, however accounts
eg electricity, phone can be paid by telephone banking or you may be able to go to the
relevant internet site eg Telstra and pay by credit card. Money accumulated on this account
can be rolled over at the end of the financial year and the (Bank) is currently paying interest
of 0.05% annually on the account.
Periodic Payments. – Forms from the (Bank) are available at (address of the bank). The
employee is responsible for the filling out of these forms and forwarding them to the (Bank)
for process, as this is not the responsibility of the (Company Inc).
Direct Debits – it is the responsibility of the employee to makes all arrangement for direct
debits. This must be done through your own financial institution and can be debited from
your Salary Benefits ACCOUNT, not your Salary Benefits Card.
Ceasing Arrangements
If at any time an employee wishes to cease the Salary Packaging they must do so in
accordance with the Participation Agreement. On termination of employment this
agreement will cease to apply.