In the dynamic landscape of small businesses, where every resource counts, offering enticing employee benefits can be a game-changer. Businesses that are able to offer salary packaging solutions elevates appeal to prospective employees and can improve employee retention. There are also substantial tax savings available from effective salary packaging. This innovative practice, also known as salary sacrifice, allows employees to utilise pre-tax income for specific expenses, resulting in reduced taxable earnings and significant GST savings.
Salary packaging is often seen by small businessowners as too hard, too complicated or only something big business can offer. That is not the case. At Altitude Advisers, we help small businessowners understand the value their team can gain, the tax and accounting requirements for the business while our friends at Simplygreen provide a salary packaging service for any small business, no matter the size.
Unlock the Power of Novated Leasing to Attract and Retain Talent
Novated Leasing is a financial arrangement that covers vehicle financing and associated running costs through a combination of pre-tax and post-tax income. This not only reduces income tax for employees but also results in significant GST savings on routine vehicle expenses like fuel, maintenance, servicing, registration, insurance, and roadside assistance.
Thus, offering salary packaging is a strategic move in your business plan to attract and retain top talent. This flexible compensation approach aligns with the trend of personalised remuneration, granting employees the freedom to structure their compensation and enhance their take-home pay; a powerful tool in the competitive job market, where the cost of living is a growing concern. Partnering with Simplygreen for salary packaging administration ensures that your small business promotes financial freedom and well-being within the workforce. By simplifying the process and maximising benefits, Simplygreen becomes the ally your small business needs to thrive in the evolving landscape.
FBT Exemption for Electric Vehicles: Driving Additional Savings for Employees
For most employees privately purchasing a vehicle, their vehicle is not used for work, so they receive no tax savings each year. Through salary packaging provided by an employer, an employee can use pre-tax income to pay loan repayments and running costs of a vehicle. Fringe Benefits Tax (FBT) is factored into the salary packaging arrangement, offsetting some of the tax saving the employee receives. Although the vehicle may not be used for work purposes and after FBT, the salary packaging arrangement often provides the employee with a worthwhile tax saving each year.
The introduction of the Electric Car Discount by the Australian Government significantly boosts the tax saving by removing FBT on eligible electric cars that meets ALL of the following criteria:
- Battery electric, Hydrogen fuel cell electric or plug-in hybrid (PHEV) vehicles
- Eligibility for a PHEV ceases 1 April 2025. The vehicle must be received and the salary package arrangement in place before this date.
- A car designed to carry a load less than 1 tonne and fewer than 9 passengers. This excludes most Utes and vans. Motorcycles and scooters are not eligible.
- Below the luxury car tax limit for fuel efficient vehicles, currently $89,332 for the 2023-24 financial year
This initiative allows employees to gain the flexibility to pay for the finance and running costs solely from their pre-tax income, a financial strategy that both provides maximum tax savings and promoting the adoption of sustainable transportation by improving affordability.
Example
An employee earning $100,000p. a wants to purchase a new vehicle for $83,000, financed over 5 years. The three options available are:
- Purchase any type of vehicle and finance the purchase privately,
- Purchase any type of vehicle through salary packaging, or
- Purchase an eligible electric car through salary packaging.
Gross wages are $3,846.15 per fortnight. Finance repayments, admin fees and annual estimated running costs are $982.31 per fortnight. A comparison of the fortnightly and annual tax savings can be summarised as follows:
| Private Purchase | Salary Package: Fuel/Hybrid Vehicle | Salary Package: FBT Exempt Electric/Plug-In Hybrid Vehicle | |
|---|---|---|---|
| Each Fortnightly Pay: | |||
| Gross Wage | $3,846.15 | $3,846.15 | $3,846.15 |
| Less: Salary Packaging PRE Tax deduction | $0 | ($256.63) | ($805.40) |
| Taxable Wage | $3,846.15 | $3,589.52 | $3,040.75 |
| Less: PAYG Tax | ($962.00) | ($874.00) | ($684.00) |
| Less: Salary Packaging POST Tax deduction | $0 | ($603.64) | $0 |
| Net Take Home Pay | $2,884.15 | $2,111.88 | $2,356.75 |
| Less: Out of Pocket Vehicle Costs | ($885.93) | $0 | $0 |
| Net Income After Vehicle Costs | $1,998.22 | $2,111.88 | $2,356.75 |
| Fortnightly Increase to Take Home Pay | $0 | $113.66 | $358.53 |
| Annual Saving from Salary Packaging: | $0 | $2,955.16 | $9,321.78 |
The Simplygreen Advantage for Small Businesses
Enter Simplygreen, a trailblazer in the salary packaging realm since 2007. This eco-friendly organisation specialises in tailoring salary packaging solutions for various industries, including not-for-profits, healthcare, and private enterprises. Choosing Simplygreen means entrusting your salary packaging program to experts, streamlining administration and ensuring full compliance. The administrative burden and compliance requirements are all but impossible for small businesses to take on themselves, without a resident expert in this field. Outsourcing this function is often the most cost-effective manner to stay competitive in a tough labour market.
Carbon-Negative Salary Packaging: A Green Commitment
Simplygreen stands out as the first organisation in the industry to offset emissions for all novated leased vehicles, operating as a carbon-negative salary packaging provider. Beyond this, the company offers extra incentives for those transitioning to electric vehicles, aligning with their commitment to creating happy, healthy, and sustainable workplaces.
Want to know more?
Ready to unlock the full potential of salary packaging for your small business and empower your employees with unparalleled benefits? Contact Altitude Advisers to arrange a meeting and discuss how salary packaging works within your business, the value we have seen offering it to our team and the ease with which the Simplygreen team simplifies the process, ensuring a hassle-free experience for both you and your employees.
