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Money tip #3 – salary packaging

If you’re looking to add extra cash to your bottom line, salary packaging might be the way to go. This arrangement, also known as salary sacrifice, is an agreement between employer and employee to relinquish part of their salary or wage in return for the employer providing benefits of a similar value.

This arrangement is an Australian Tax Office-recognised method of restructuring income to suit an employee’s needs. It also has tax benefits, seeing as the benefit is taken out of an employee’s net income, rather than after tax.

Items which can be salary packaged might include company vehicles, mobile phones or laptop computers.

Another popular method of salary packaging is to redistribute income into superannuation. Instead of paying the mandatory nine per cent, an employee can request an employer to add an extra amount to their super fund on top of this. The benefit of this is the amount is taxed at 15 per cent, and not at the top marginal income tax rate. This can save some people over 30 per cent in tax.

Be careful to weigh up the pros and cons of salary packaging on your budget and determine whether you can forgo part of your salary or wage for this kind of arrangement.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Wednesday, December 21, 2011

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