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The ADF Financial Services Consumer Centre receives numerous enquiries from ADF members about the meaning, merits and consequences of the concept known as “salary sacrificing”. Salary sacrificing (often also called “salary packaging”) is an arrangement with your employer where certain items or benefits can be paid for out of your pre-tax salary. This is designed to reduce your taxable income and therefore reduces your income tax.
So when it’s all boiled down, salary sacrificing is simply about structuring your personal financial affairs to save tax. That’s it. So if you don’t save any tax, why do it?
The Internet is full of sites extolling the virtues of salary sacrificing all manner of products and services, especially motor vehicles, superannuation and computers. The trouble is that not all of these sites are impartial due to their commercial connections. Therefore, we have set out below some purely educational links about which you can be confident in assessing whether salary sacrificing is for you.
The first is an article from our Centre’s website about salary packaging which, amongst other things, encourages you to think about whether you really do need that big, shiny and expensive new car; or could you survive with a lesser vehicle or none at all?
Secondly, we encourage you to read the content on the website of the Australian Securities and Investments Commission on salary packaging.
Thirdly, we recommend the relevant section of the Australian Tax Office website which authoritatively explains the concept and includes useful examples:
You should also be aware that Defence has an appointed contractor, Smart Salary Pty Limited, the role of which is to explain and set up salary sacrifice arrangements for ADF members. Their website outlines the range of products and services that can be sacrificed through your ADF salary package. Make sure you receive any proposal in writing and be clear about the tax savings, costs and other benefits that are claimed.
If you feel that you need some professional advice in making a decision, you could seek the advice of a qualified accountant/registered tax agent which may be found on these sites:
Alternatively, you could seek advice from a licensed financial adviser. Relevant links on the Centre’s website are:
However, a qualified accountant/registered tax agent may be more suitable for this kind of one-off tax advice. As always, make sure you understand the scope and cost of any advice and get this in writing before proceeding.
