- What is salary packaging?
- What are the advantages of Salary Packaging?
- Is Salary Packaging Legal?
- What guidance is given by the ATO in regard to salary packaging arrangements?
- Who can participate in salary packaging at the University of Western Australia?
- Do I have to enter into a salary packaging arrangement?
- Who is responsible for the administration of salary packaging at UWA?
- What benefits may be salary packaged at UWA?
- What do I need to do to commence salary packaging my UniSuper Defined Benefit Plan/Accumulation 2 member/employee contributions?
- Will superannuation tax affect the salary packaging of my UniSuper Defined Benefit Plan/Accumulation 2 member or UniSuper Accumulation 1 voluntary superannuation contributions?
- How will packaging UniSuper Award Plus Plan voluntary contributions affect the University contributions to UniSuper Award Plus Plan made on my behalf?
- How will this affect my superannuation entitlement?
- Where are the University-provided child care facilities?
- What do I need to do to commence salary packaging fees for University-provided child care?
- What is a novated car lease?
- Can I only package a novated car lease on a new car?
- Do I have to get a car through a specific dealer?
- How will salary packaging be reflected on my Payment Summary?
- What is Fringe Benefits Tax (FBT)?
- How will salary packaging affect the calculation of my allowances and other earnings which are not basic pay?
- How will taking leave affect my salary packaging arrangement?
- Can I salary package earnings which are in addition to my normal basic pay?
- What is the maximum amount of my salary I can package?
- How often can I vary the amounts I salary package?
- What are the implications for me if I enter into a salary packaging arrangement?
- How easy is it to opt out of salary packaging?
- What documentation will I receive when I decide to enter into a salary packaging arrangement with the University?
- How will salary packaging affect documentation I may receive in the future?
- What do I need to do to commence salary packaging my UniSuper Defined Benefit Division / Accumulation 2 member/employee contributions?
- Will superannuation tax affect the salary packaging of my UniSuper Defined Benefit Division / Accumulation 2 member or UniSuper Accumulation 1 voluntary superannuation contributions?
- How will packaging UniSuper Voluntary (additional) contributions affect the University contributions to UniSuper Defined Benefit Division / Accumulation 2 / Accumulation 1 made on my behalf?
- How will this affect my superannuation entitlement?
Frequently Asked Questions
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Q1. What is salary packaging?
Salary packaging is allowing staff to receive part of their pay in a form other than take-home pay (cash). By packaging their salary, employees receive part of their pay as cash and part of it as a benefit. The benefit is paid on the employee's behalf by the University, the employee receives less pay and, therefore, pays less PAYE income tax on their reduced income.
Salary packaging may be referred to as 'salary sacrificing' or flexible remuneration planning.
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Q2. What are the advantages of salary packaging?
Salary packaging is gaining in popularity with employers who recognise its potential to attract, recruit and retain quality staff. For the same employment cost, employers may be able to offer a higher net benefit to staff than organisations that offer a more traditional salary approach. Employees, in turn, are given the opportunity to structure their remuneration according to their personal circumstances, age and needs.
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Q3. Is salary packaging legal?
Salary packaging is legal and is a practice offered by a number of private and public organisations.
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Q4. What guidance is given by the Australian Taxation Office (ATO) in regard to salary packaging arrangements?
The ATO decrees that, to be effective, a salary packaging arrangement must operate prospectively; in other words, employees must not earn income and then direct their employer to apply it on their behalf. Salary which is packaged retrospectively will be reclassified as income by the ATO and subject to income tax.
The salary sacrifice arrangement for packaging superannuation contributions must be properly structured so that the amount sacrificed is not in lieu of an existing and continuing obligation of an employee to make contributions. Changes made to the UniSuper Trust Deed, effective from 1 July 1994, allow employers to pay member contributions to UniSuper.
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Q5. Who can participate in salary packaging at The University of Western Australia?
Salary packaging is available to members of staff covered by the Academic Staff, General Staff, ELICOS or Child Care Agreements who, at the time of entering into salary packaging, are on a minimum three (3) month or longer employment contract.
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Q6. Do I have to enter into a salary packaging arrangement?
A Salary packaging is a voluntary option for members of staff. The decision of whether or not to enter into a salary packaging arrangement will rest with each individual employee.
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Q7. Who is responsible for the administration of salary packaging at UWA?
Rose Cunningham is currently the Salary Packaging Co-ordinator within the HR Systems & Employee Benefits team. This position will be responsible for the implementation and on-going administration of salary packaging.
Tel: (08) 6488 7186
Fax: (08) 6488 7138
Email: rose.cunningham@uwa.edu.au
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Q8. What benefits may be salary packaged at UWA?
Current items able to be packaged are listed in What can be packaged?.
Under current regulations, all the above listed benefits are exempt from fringe benefits tax (FBT) except for the Novated Car Leases, which are subject to FBT.
The current eligibility 'rules' for UniSuper Defined Benefit Plan/Accumulation 2 membership will continue to apply, ie, staff must be on employment contracts of 2 years before they may join UniSuper Defined Benefit Plan/Investment Choice Plan.
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Q9. What do I need to do to commence salary packaging my UniSuper Defined Benefit Plan/Accumulation 2 Plan member/employee contributions?
Only those employees who are existing members of UniSuper Defined Benefit Plan/Accumulation 2 Plan, or who are eligible to become members, will be entitled to salary package their employee contributions.
If you are an existing member, you may commence salary packaging contributions from the first day of any future pay period. New members to the Fund may commence salary packaging from the date of joining the Fund provided all the paperwork is signed prior to the joining date or from the first day of any future pay period.
You will need to complete and sign UniSuper documentation if you have not already done so. In addition, you will enter into a salary packaging arrangement with the University by signing a salary packaging contract.
Once all the documentation has been completed, your current UniSuper Defined Benefit Plan/Accumulation 2 employee contribution (7% of salary) will cease and your pay will be reduced by 8.25%. The 8.25% will be forwarded to UniSuper on your behalf where 7% will be credited to your UniSuper Defined Benefit Plan/Accumulation 2 account and the rest will be put to the 15% contributions tax that applies.
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Q10. Will superannuation tax affect the salary packaging of my UniSuper Defined Benefit Plan/Accumulation 2 member or UniSuper Award Plus Plan voluntary super-annuation contributions?
Under current legislation, employer contributions to UniSuper are subject to a 15% contributions tax. However, employee contributions to UniSuper are not subject to this tax because they are paid from after-tax salary. If an employee contribution is salary packaged, it becomes an employer contribution and, accordingly, is subject to the 15% contributions tax. This is why the 7% employee contribution to UniSuper Defined Benefit Plan/Accumulation 2 becomes an 8.25% 'employer' contribution (8.25% less 15% equals 7%).
From 1 July 2007 the government has set contribution limits. If your contributions exceed these limits, you may have to pay extra tax on the excess contributions. As at 1 July 2007 the 15% contribution tax applies for the first $50,000 of before-tax contributions to your super fund (includes employer contributions and salary packaged contributions). Any before-tax contributions received above this $50,000 cap will be taxed at the highest marginal rate of 46.5% including the Medicare levy. The $50,000 cap (as at 1 July 2007) is indexed each year, refer to Tax Office or UniSuper web sites for current cap level. Until 30 June 2012 transitional arrangements apply that allow anyone aged 50 or over contributions up to $100,000.
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Q11. How will packaging UniSuper Accumulation 1 voluntary contributions affect the University contributions to UniSuper Accumulation 1 made on my behalf?
Salary packaging UniSuper Accumulation 1 voluntary contributions will not affect existing employer contributions made by the University on your behalf. The University will continue to pay contributions to UniSuper Accumulation 1 based on your superannuable salary (not your reduced salary).
Voluntary contributions made by an employee to UniSuper Accumulation 1 are in addition to the employer contributions made by the University.
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Q12. How will this affect my superannuation entitlement?
Superannuation benefits are based on the gross salary of the position occupied and are not affected by employees reducing their gross salary. However, employees must be aware of the possible disadvantages of packaging super-annuation contributions: under present legislation, employees could face reduced tax concessions on super-annuation resignation and retirement benefits, an increase in the amount that the super-annuation Surcharge is applied to or may find their benefits are greater than the Reasonable Benefit Limits (RBL). This is why it is important for employees to seek financial advice prior to entering into a salary packaging arrangement.
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Q13. Where are the University-provided child care facilities?
There are four child care facilities at the University:
UWA Employees' Child Care Centre, Monash Ave, Nedlands (long day care)
UniCare Child care Centre, 24 Parkway, Nedlands (long day care)
After School Care Centre, 18 Parkway, Nedlands
School holiday programmes at 18 Parkway, Nedlands
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Q14. What do I need to do to commence salary packaging fees for University-provided child care?
You will need to advise the Co-ordinator, Salary Packaging, the amount of fortnightly fees you pay to your child care provider.
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Q15. What is a novated car lease?
A novated car lease is when an employee organises to lease a car through a fleet management company. The lease is then 'novated' or transferred to the employer. In other words, the employer becomes responsible for the lease repayments. However, if the employee ceasing working for the employer the lease and all its obligations become the employee's responsibility. The residual on the car lease is also the employee's responsibility.
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Q16. Can I only package a novated car lease on a new car?
No you can package a novated car lease on a new or a used car. The only restrictions apply to the value and age of the car. In the case of age most finance companies will not approve a lease if a car will be over 10 years old or 100,000km at the end of the lease period.
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Q17. Do I have to get a car through a specific dealer?
You can go to any car dealer to get your car but but it is advisable to contact Easifleet Management, 484 Albany Highway, Victoria Park in the first instance.
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Q18. How will salary packaging be reflected on my Payment Summary?
Your reduced taxable income and the amount of tax paid will be reported on your Payment Summary. However, if you package fringe benefits taxable items and the taxable value of the fringe benefits exceeds $2,000 within the FBT year (1 April 31 March) the grossed up value of this will be shown on your Payment Summary under the heading Reportable Fringe Benefits. Whilst this will not affect your income tax it will be taken into account when the super-annuation surcharge, MediCare Levy surcharge, child care benefits, child care maintenance etc is calculated.
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Q19. What is Fringe Benefits Tax (FBT)?
FBT was introduced in 1986 to tax the value of benefits given to employees. A fringe benefit is a benefit which is provided to an employee in respect of employment; FBT is a tax payable by employers on the value of the fringe benefit. Certain items may be exempt from FBT (for instance super-annuation), some may be treated concessionally (for instance cars) and some items attract the full rate of FBT.
Child care is only FBT exempt if, along with other conditions, the child care facility is located on the employer's premises. This is why we are only offering University-provided child care as a non cash benefit for salary packaging purposes.
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Q20. How will salary packaging affect the calculation of my allowances and other earnings which are not basic pay?
The following payments will be calculated on your Award/Agreement rate of pay (not your reduced taxable income):
Leave Loading
Redundancy/early retirement payments
Overtime
Shift work
Outstanding leave entitlements on termination of appointments
Higher Duties Allowances (HDAs) will be calculated on the difference between the two
Award/Agreement rates of pay applicable at the time.
The following payments will be calculated on your reduced taxable income:
- Any form of leave taken whilst salary packaging.
- If you take leave whilst salary packaging, you will continue to receive your reduced level of pay and benefits will continue to be paid by the University on your behalf except leave without pay and leave at half pay where you must withdraw from salary packaging prior to proceeding on this type of leave.
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Q21. How will taking leave affect my salary packaging arrangement?
Any form of leave taken whilst salary packaging will be paid at the reduced rate of pay, ie, there is no difference to the take-home pay of the employee since the benefits will continue to be paid by the University and the employee will continue to receive his/her reduced pay.
However, there are certain conditions to be noted relating to leave:
- Leave on half pay will not be allowed while the salary packaging contract is in place.
- Leave Without Pay will not be allowed while the salary packaging contract is in place. The only exception to this rule is Sick Leave Without Pay (SLWOP).
- Sick Leave Without Pay will cause the salary packaging contract to be suspended.
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Q22. Can I salary package earnings which are in addition to my normal basic pay?
Temporary allowances, casual earnings or additional payments such as overtime, leave loading or shift allowances may not be salary packaged.
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Q23. What is the maximum amount of my salary I can package?
The ATO does not stipulate any limit nor does the University. The ATO has however advised that commencing 1 July 2007 there will be restrictions applied to the amount that can be packaged into superannuation in regards to tax applied.
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Q24. How often can I vary the amounts I salary package?
You can vary the amounts at any time provided sufficient notice is provided and it is for a future date.
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Q25. What are the implications for me if I enter into a salary packaging arrangement?
Salary packaging will have its advantages and disadvantages and will depend upon personal circumstances. The net gains to be made must be weighed against potential future taxation penalties in regard to packaging super-annuation contributions and the potential loss of Government financial assistance for parents who salary package fees for University-provided child care.
The University strongly recommends that employees seek professional, financial advice prior to entering into a salary packaging arrangement.
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Q26. How easy is it to opt out of salary packaging?
Provision will be made in the salary packaging contract for employees and the University to "opt out" of salary packaging. An employee who "opts out" of packaging UniSuper Defined Benefit Plan/Investment Choice Plan member contributions would revert back to paying the 7% member contribution from after-tax salary.
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Q27. What documentation will I receive when I decide to enter into a salary packaging arrangement with the University?
A salary packaging contract will be drawn up between you (the employee) and the University (your employer). This contract will be valid until such time as either party decides to terminate the contract.
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Q28. How will salary packaging affect documentation I may receive in the future?
The format of your Salary Advice (payslip) will reflect your salary packaging arrangements.
Your bi-annual UniSuper statements will reflect the amount of contributions paid under a salary packaging arrangement.
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Q29. What do I need to do to commence salary packaging my UniSuper Defined Benefit Division / Accumulation 2 member/employee contributions?
Only those employees who are existing members of UniSuper Defined Benefit Division / Accumulation 2, or who are eligible to become members, will be entitled to salary package their employee contributions.
If you are an existing member, you may commence salary packaging contributions from the first day of any future pay period. New members to the Fund may commence salary packaging from the date of joining the Fund provided all the paperwork is signed prior to the joining date or from the first day of any future pay period.
You will need to complete and sign UniSuper documentation if you have not already done so. In addition, you will enter into a salary packaging arrangement with the University by signing a salary packaging contract.
Once all the documentation has been completed, your current UniSuper Defined Benefit Division / Accumulation 2 employee contribution (7% of salary) will cease and your pay will be reduced by 8.25%. The 8.25% will be forwarded to UniSuper on your behalf where 7% will be credited to your UniSuper Defined Benefit Division / Accumulation 2 account and the rest will be put to the 15% contributions tax that applies.
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Q30. Will superannuation tax affect the salary packaging of my UniSuper Defined Benefit Division / Accumulation 2 member or UniSuper Accumulation 1 voluntary super-annuation contributions?
Under current legislation, employer contributions to UniSuper are subject to a 15% contributions tax, refer special notes. However, employee contributions to UniSuper are not subject to this tax because they are paid from after-tax salary. If an employee contribution is salary packaged, it becomes an employer contribution and, accordingly, is subject to the 15% contributions tax. This is why the 7% employee contribution to UniSuper Defined Benefit
Division / Accumulation 2 becomes an 8.25% 'employer' contribution (8.25% less 15% equals 7%).
From 1 July 2007 the government has set contribution limits. If your contributions exceed these limits, you may have to pay extra tax on the excess contributions. As at 1 July 2007 the 15% contribution tax applies for the first $50,000 of before-tax contributions to your super fund (includes employer contributions and salary packaged contributions).. Any before-tax contributions received above this $50,000 cap will be taxed at the highest marginal rate of 46.5% including the Medicare levy. The $50,000 cap (as at 1 July 2007) is indexed each year, refer to Tax Office or UniSuper web sites for current cap level. Until 30 June 2012 transitional arrangements apply that allow anyone aged 50 or over contributions up to $100,000.
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Q31. How will packaging UniSuper Voluntary (additional) contributions affect the University contributions to UniSuper Defined Benefit Division / Accumulation 2 / Accumulation 1 made on my behalf?
Salary packaging UniSuper voluntary contributions will not affect existing employer contributions made by the University on your behalf. The University will continue to pay contributions to the UniSuper plans based on your superannuable salary (not your reduced salary).
Voluntary contributions made by an employee to the UniSuper plans are in addition to the employer contributions made by the University.
Currently UniSuper do not levy an administration fee on voluntary contributions
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Q32. How will this affect my superannuation entitlement?
Super-annuation contributions and benefits are based on the gross salary (superannuable) of the position occupied and are not affected by employees reducing their gross salary. However, employees should consider all the financial implications of salary packaging superannuation contributions and if required seek financial advice. Employees should review their packaging arrangements on a regular basis taking into account changes to superannuation legalisation, refer Special Notes.
