Salary and Wages
An individual is taxed on their gross salary and wages. Your gross salary and wage figure is on your Income Statement (was Payment Summary) provided by your employer. Salary packaging payments are not income and are excluded from ‘salary and wages’. Hence, your salary packaging money is never subject to income tax.
For example, if you earn $68,550 and salary package $15,900 for expenses and $2,650 for meals / accommodation, your ‘salary and wage’ figure for tax purposes is only $50,000 ($68,550 – $15,900 – $2,650).
Salary Packaging – What is Reported? (1 April 2022 – 31 March 2023)
Your salary packaging amount is shown on your Income Statement. It is called the Reportable Fringe Benefits Amount (RFBA). As the term suggests, it is a ‘reportable’ amount – it is not income and is not taxed. The amount reflects the so called ‘value of benefits’ (payments) paid to you during the 12 months ended 31 March 2023.
The figure is what the ATO calls a ‘grossed-up’ amount. That is, it is a gross salary estimate of the value of the salary packaging money paid to you. The figure is calculated as follows:
- Salary Packaging Payments x 1.8868 = ‘Reportable Fringe Benefits Amount’
- E.g. Expenses: $15,900 x 1.8868 = $30,000
- Meals: $2,650 x 1.8868 = $5,000
- Total: $35,000
The RFBA amount is included in your Tax Return (refer IT1). The amount is not taxed, but it may be used by the ATO and other Government agencies for any income ‘tests’.
Not all salary packaging payments are reported. For example, car parking and remote area housing concessions.
Superannuation – 1 July 2022 – 30 June 2023 (refer IT2)
If you have ‘salary sacrificed’ into your superannuation fund, this is also reported. The actual amount ‘sacrificed’ is shown as Reportable Employer Superannuation Contributions.
Superannuation salary sacrificed may be used to determine your eligibility for certain government supported programs. These include income support, family assistance, child support and superannuation co-contribution. Please discuss with your accountant or financial adviser.
The value used by Centrelink ($69,560) is identical to your earnings figure before salary packaging. Hence, Please note, if you are salary sacrificing super, the maximum is $27,500 (incl. employer super) for 2022/23.
Income Statement – Total Earnings
Your Income Statement will show your total earnings from your employer (both taxable and nontaxable earnings). This may include:
- salary and wages
- reportable fringe benefits amount; and
- reportable superannuation payments (salary sacrifice).
Reportable Fringe Benefits Amount (RFBA – Refer IT1). What Do I do?
For most people, nothing. However, it is relevant if you have a HELP debt, Centrelink (eg. Family Tax Benefit A or B), child support or if you have no private health (hospital) insurance and you are a ‘high’ income earner
a) Centrelink
Government agencies deal with the RFBA differently. For example, Centrelink will adjust your RFBA down as follows:
- Reportable Fringe Benefits Amount x 0.53
- E.g. $35,000 x 0.53 = $18,550 (15,900 + $2,650)
Centrelink reduces the reported figure back to its cash value ($15,900 + $2,650). This figure is added to your taxable income (salary) to determine your Centrelink entitlements. Therefore, Centrelink uses the same gross salary (earnings) figure before salary packaging. Hence, your Centrelink entitlements should be unchanged because of salary packaging. That is good news.
b) HELP Debt, Child Support, Private Health
If you have a HELP debt, pay or receive child support or you are a ‘high’ income earner {without private health (hospital) insurance}, you need to be careful. This is because these government agencies will calculate an ‘adjusted income’ figure, which includes wages plus your reported salary packaging (and super) as follows:
Adjusted Income’ = Taxable Wages + Reportable Fringe Benefits Amount (RFBA)
Therefore, for someone earning $68,550 and salary packaging $15,900 + $2,650:
| Earnings | Income Summary | ‘Adjusted Income’ |
| Salary & Wages | $50,000 | $50,000 |
| Reportable Fringe Benefits | $35,000 | $35,000 |
| Total | $85,000 |
The Payment Summary amounts (wages and reportable fringe benefits) are simply added together to calculate your ‘adjusted income’. This is $85,000 in the example. So, what do you do?
If you have a HELP debt, your HELP repayments will increase slightly. Ask GO Salary for a calculation. Send your details and gross income (before salary packaging e.g. $68,550) to getgo@gosalary.com.au. GO Salary will estimate the HELP payment to be deducted each pay. Otherwise, you can calculate it yourself at www.gosalary.com.au.
If you have child support, contact the CSA (Child Support Agency) and discuss how your income may impact on child support payments. You may elect not to salary package as a result (but a novated car lease is still an option).
Company Car / Novated Lease
If you have private use of a work vehicle or a novated lease, the tax value of the vehicle may be included in your Reportable Fringe Benefit Amount (RFBA). The tax value is calculated using a Tax Office formula.
The tax value of the vehicle is reported in the same manner as your other salary packaging. Hence, a single reportable figure is shown on your Income Summary, being the sum of the two amounts (car fringe benefit and salary packaging). Contact GO Salary for a further explanation.
The information provided is of a general nature. It is not financial or taxation advice. We strongly recommend readers seek professional advice from an accountant or financial adviser.
Questions?
Please contact us and we’ll be happy to help!