How to Get the Best from Salary Packaging for IT Contractors
Salary packaging (with the goal of reducing taxable income and therefore tax payable) is governed by the Fringe Benefits Tax (FBT) system.
FBT acts to impose tax on benefits that are provided to employees in lieu of cash. The benefits are valued based on FBT rules and then taxed at the current FBT rate (which for the 2018 FBT year is 47%).
There are some benefits available to package which are concessionally taxed or exempt under the FBT regime and this is generally what makes these items tax effective.
Tax treatment will also differ between employers depending on what type of employer you are with (for example hospitals and ambulance services have further concessional rules).
As a CPA accounting firm with an IT contractor payroll service as one of our business units, we are diligent to ensure that all items claimed through the payroll service are legitimate packaging items and FBT is accounted for correctly. This may mean that in some cases, we will not allow some items to be salary packaged such as gym equipment or school fees as the cost of packaging the item in regards to FBT payable on the benefit would outweigh the benefit received.
As an IT contractor to a taxable employer, the following items would be concessionally taxed or exempt and may be worth packaging.
- Portable Electronic Devices that are used primarily for work use (50% or more) such as mobile phones, laptops and tablets
- Vehicles and associated costs
- Items that would be deductible in your tax return – tax agent fees, income protection, computer equipment under $300, stationery
Our accountants can talk to you about your own specific situation.
For contractors that come on board with us for payroll services we offer a credit of $247.50 per financial year (equivalent to a basic return) for accounting services. This is pro-rated for part years with Callaghans IT Pays.
If you would like more information please visit Callaghans IT Pays or complete the below form for our IT Pays Consultant to contact you.