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Salary packaging and Taxation - Essay Example

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Salary packaging and Taxation

Fringe benefits tax will apply to both Chris and his employer for this agreement during the FBT year that begins in 1st April 2011 up to 31st March 2012. Superannuation is money put in for a person's retirement. Strict government policy prevent untimely access to conserved benefits except in extremely limited and constrained circumstances, as well as severe financial adversity or on a compassionate basis, such as for medical cure not obtainable through Medicare. Usually, superannuation benefits are in three categories: conserved benefits; restricted non-conserved benefits; and unhindered non-preserved benefits. Mainly superannuation is concessionary taxed at a level charge of 15% at two key points: on contributions, and on salary. Capital Gain Tax inside the fund though is taxed at a charge of 10% if the properties held for longer than twelve months. Contributions whether in the type of employer superannuation, or associate salary sacrifice are levied at this rate. In the majority of the industry funds, the salary tax is paid prior to profits are disbursed to associates so it appears as a lesser level of interest on the worker’s statement. From the time when it was introduced, employers have been obligated to make compulsory contributions to superannuation in place of the majority of their workers. ...
Superannuation contributions made by Chris are not treated as fringe benefits but as employer contributions. The initial contribution that Chris was making was $17,000. He however, decided to increase it by $15,000. This contribution has to meet three conditions, which are; it must be an arrangement before service there should be an agreement between West Gate Pty Ltd and Chris and Chris should not have an access to the sacrificed salary (Marsden, 2010). According to the Australian tax office ruling, the superannuation contributions are taxed in the superannuation funds such as 15% (Australian National Audit Office, 1999). West Gate Pty Ltd will therefore, pay the following amount in tax for contribution: 15/100 x $32,000 = $ 4,800 Chris has salary packaged other items apart from the superannuation contributions. The first item is a laptop that one of his children requires for school. It is worth $3,300. This is a fringe benefit for Chris. According to the Australian tax office ruling S23, the tax is levied at 46.5% for the FBT year ending 31st March. West Gate Pty limited will pay the following amount for the benefit; 46.5% x $3,300 = $1,534.50 Under this, the income test will take into account the fringe benefit received. This fringe benefit is not included in the employee’s assessable income. The employer will be giving a benefit directly to a relative of the employee. Anything is accomplished by the employer in any agreement, arrangement or transaction so as to award any benefit upon any individual other than the member of staff, whether directly or obliquely. The benefit would have been taxed if it had been contracted to the employee. The next item that Chris has packaged is a new car. A taxable benefit is be ...Show more


Tutor Course 26th September 2012 SALARY PACKAGING Question 2 Part A Salary packaging, also called salary sacrifice is an arrangement whereby an employee’s total monetary remuneration for performing employment duties is taken in the form of cash and benefits instead of being paid wholly in the form of salaries or wages (Colin, 2012)…
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Salary packaging and Taxation
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