An employee may elect to forgo (sacrifice) a part of their salary, and take a non-cash benefit instead.
The non-cash benefit may be subject to Fringe Benefits Tax (FBT):
Benefits subject to FBT will be those that would not be tax deductible to the employer or employee, and include such items as rent or mortgage payments, children’s school fees, credit card payments, telephone bills and health insurance premiums.
Benefits not subject to FBT will be benefits provided by a PBI (subject to capping limits) and which will include the items noted above; that is, such payments can be made on an FBT-free basis by a PBI but not otherwise, and payments for certain items that are deemed to be exempt from FBT, regardless of the status of the employer.
These items are:
- Laptop and notebook computers (one per year, per employee)
- Work related computer software
- Portable computer printers (one per year, per employee)
- Personal organizers
- Electronic diaries
- Protective clothing
- Work related “tools” which could a digital camera, for example
The other benefit often taken is additional superannuation contributions.
An employee who wants to salary sacrifice for things like mortgage payments in a non-PBI situation would be required to include, in the value of the benefit, the amount of FBT payable by the employer, and given that that tax is set at the highest marginal rate of tax, 46.5%, that really isn’t a viable option for the employee.
Note that the decision to sacrifice the salary must be made before the entitlement to receive the salary arises; that is, for example, you cannot salary sacrifice a payment for annual leave after the leave entitlement has accrued and when you are about to receive the payment.