Salary Packaging And Allowance Arrangements

Question 1

Explain the difference between permanent and temporary tax advantages

Answer 1

Permanent: when a tax benefit is concessionally taxed or exempt from FBT, attracting a lower tax rate than the employees marginal rate

Temporary: when expense payments are otherwise deductible to employee and can be from pre-tax pay. Produces a temporary tax advantage ( the tax deduction benefit is received earlier than annual income tax return)

Question 2

Define allowances. Who gets them and give 3 common examples

Answer 2

Allowances are specific payments for employees are identified as not being wages. Do not involve a sacrifice of existing cash salary

Given to people who: do certain tasks or skills
2. Use own tools at work
3. To work in unpleasant or dangerous conditions

Eg. uniforms and special clothing
Tools and equipment
Travel and fares
Car - covers petrol, tyres, oil and repairs
Phone
First Aid
Supervisor
Living away from home

Question 3

What are 3 common benefits of salary sacrifice?

Answer 3

Voluntary Superannuation contributions, expense payments and motor vehicles