23 June 2022 3:21

With the Fringe Benefits Tax, should I even salary sacrifice for a car?

Does salary sacrifice count as fringe benefit?

Salary sacrificed super contributions under an effective salary sacrifice arrangement are considered employer contributions. These are not fringe benefits when paid for an employee to a complying super fund.

How can I reduce my fringe benefits tax?

How to Reduce Your FBT Payment

  1. Replacing fringe benefits with cash salary.
  2. Providing benefits that your employees would be entitled to claim as an income tax deduction if they had paid for the benefits themselves (the ‘otherwise deductible’ rule);
  3. Providing benefits that are exempt from FBT;
  4. Using employee contributions.

How is FBT on a car calculated?

The calculation is: Taxable Value x Gross-Up Rate x FBT Rate. Taxable Value – the amount calculated using either Statutory Formula or Operating Cost. Gross-Up Rate – provided by the ATO, the rates are 2.0802 and 1.8868 (2.0802 is for benefits with GST, and 1.8868 for benefits without).

Is it better to salary sacrifice or after tax?

If you have a very low income, your income tax rate may be lower than the 15% contributions tax deducted for salary sacrifice, so you could pay less tax by making after-tax contributions rather than salary sacrifice.

Is it worth salary sacrificing a car?

Salary sacrifice allows you to “sacrifice” some of your salary to pay for items using pre-tax dollars, effectively reducing your taxable income and putting more money in your pocket each pay day. It is a good alternative to buying a car outright or getting a car loan.

What are the pitfalls of salary sacrifice?

The disadvantages of schemes that give the option of a salary sacrifice to make pension contributions include: If you sacrifice some of your salary to make payments into your pension, then you are also lowering your income. A lower income could mean reduced benefits from your employer.

What are the cons of salary sacrifice?

The risks and disadvantages associated with a salary sacrifice arrangement include lack of accessibility, fluctuations in savings and possible reduction in employer contributions. While these are the main disadvantages of salary sacrifice arrangements, other risks also exist.