Salary packaging-1 - It is notes for assessments. PDF

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SALARY PACKAGING EXERCISES These exercises are assuming the following: The year is 2017/18 financial year: Income tax rates Same as used for exercises elsewhere FBT rate 47% Gross-up rate type 1 2.0802 Gross-up rate type 2 1.8868 Statutory fraction All cases 20% Superannuation Guarantee Charge 9.5% Car fringe benefit with business use below 70% implies the statutory formula method is better; whereas business use above 80% implies the operating costs method is better. Medicare levy surcharge is ignored The total remuneration (salary) package or cost to the employer; is calculated by adding up the total of:  Gross salary  Cost of providing the benefits. As FBT is payable by the employer, the cost will include any FBT payable. The total employment cost also includes any super contributions by the employer (incl 9.5% compulsory or otherwise), but other on-costs such as payroll tax , workers comp etc are not included. The employer is entitled to claim GST paid as an input tax credit, and has paid GST on all the amounts except car registration. STEPS REQUIRED TO DO ANALYSIS: 1) Calculate the FBT on the car 2) Calculate the make-up of the package 3) Calculate the take-home pay of: i) Salary & SG 9.5% only (HINT: after paying for 3 benefits out of after-tax salary) ii) Salary package with all benefits 4) Do the difference between 3 (a) & 3 (b) to see the increase due to salary sacrifice 5) Prepare a reconciliation In these exercises the approach is different to the textbook in one respect, here one laptop per employee per year is exempt from FBT regardless of the level of the private use. Example: Mike is starting a position with Tibro Ltd that includes a 9.5% employer superannuation contribution of $7,808. He can elect to package a range of benefits or he can simply take a cash salary of 82,192 with Tibro, contributing $7,808 in respect of superannuation to make up the $90,000 total.

If Mike packages a range of benefits into his total remuneration of $90,000, Tibro and Mike have agreed that the superannuation contributions will be 9.5% of the adjusted salary component. INFORMATION: Mike’s package 90,000 Inclusions in package: Car (purchase price) $30,000 Superannuation guarantee 9.5% Laptop computer (no business use) $3,300 Annual work-related expenses (including diary, airport lounge $2,200 membership, professional subscriptions, mobile phone rental and calls— primarily for business) Car running costs: Novated lease payments $9,000 Fuel $3,300 $500 Registration(there is no GST on car registration, the charge to the package is the full price) Insurance $1,500 Repairs & maintenance $2,000 Total $16,300 All costs include GST where applicable; assume all lease payments are subject to GST and input tax credits are allowed.. Kilometres travelled pa 26,000 Business kilometres nil

Exercise 1 G an employee has a total remuneration package of $85,000. G has agreed with the employer that super contributions will be 9.5% of the adjusted salary component. Three main benefits are: (GST inclusive prices are given) Laptop computer (no business use) $2,200 WRE Annual work-related expenses1 $1,100 Commodore car cost $30,000 Running costs: lease payment $9,000 Fuel 3,300 Registration 500 Insurance 1,500 Repairs 1,000 15,300 Kilometres traveled per annum 26,000. No business use.

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These include airport lounge membership, diary, professional subscriptions, mobile phone rental and calls.

Exercise 2 J an employee has a total remuneration package of $100,000. J has agreed with the employer that super contributions will be 9.5% of the adjusted salary component. Three main benefits are: (GST inclusive prices are given) Laptop computer (no business use) $2,750 WRE Annual work-related expenses $1,650 SAAB car cost $50,000 Running costs: lease payment $12,000 Fuel 3,300 Registration 500 Insurance 1,600 Repairs 2,200 19,600 Kilometres travelled per annum 32,000. 80% business use.

Exercise 3 M an employee has a total remuneration package of $110,000. M has agreed with the employer that super contributions will be 9.5% of the adjusted salary component. Three main benefits are: (GST inclusive prices are given) Laptop computer (no business use) $3,300 WRE Annual work-related expenses $2,200 Volvo car cost $65,000 Running costs: lease payment $20,000 Fuel 3,300 Registration 500 Insurance 2,300 Repairs 2,200 28,300 Kilometres travelled per annum 45,000. 30% business use....