Employer Salary Sacrifice Arrangements

If you are looking for information about employer salary sacrifice arrangements, then you are in the right place. There are some important things you need to know about salary sacrifice agreements before setting them up. First of all, salary sacrifice arrangements are not always as successful as intended. In fact, sometimes they can cause more trouble if not structured properly.

Salary Sacrifice (Superannuation)

Employees benefit from salary sacrifice agreements only under certain circumstances. One of those circumstances is making a contribution to a superannuation fund. Why do employees sacrifice some of their salary? The reason is because later on they are able to withdraw the money after it earns interest.  This is much more preferable than being taxed on income prior to investing it.

Salary Sacrifice Agreements and Fringe Benefit Tax

Another reason that superannuation contributions are more preferable to employees is because it is not subject to the fringe benefit tax.  Typically, the fringe benefit tax is imposed upon benefits such as company cars, lower interest payments, or other similar items with tangible value.

However, contributions to a superannuation fund are not taxed as a fringe benefit.  That means employees entering into salary sacrifice agreements can give up some part of their wages or salary in exchange for the employer making that extra contribution to their fund.  Therefore, they offset the fringe benefit tax on other taxable items by donating a portion of their salary to their superannuation fund.

Effective Salary Sacrifice Arrangements

It is important to structure employer salary sacrifice arrangements in order to get the most benefit without incurring penalties.  An effective salary sacrifice arrangement means that future earnings are relinquished.  It cannot be for earnings paid out in the past.

Before setting up salary sacrifice agreements, you should seek the advice and assistance of your accountant in order to help you.  The accountants at Tim Nash & Associates have experience in setting up these funds.  If you would like more information about how we can help you, please contact us today.

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