Salary packaging is a great way to reduce your tax. We love showing people how it works.

Salary packaging allows your employer to pay some of your personal expenses for you. They do this using money that has not yet been taxed – which makes the expense a lot cheaper for you. Basically, if you have to pay tax before you pay for an expanse, that expense becomes a lot more expensive.

Let us show you an example:

Suppose your gross salary is $80,000. This means that your ‘marginal tax rate’ is 30%. That is, when you receive $10,000 of gross income, the tax office takes $3,000. This means that, even though you earned $10,000, you only have $7,000 left to spend.

Looked at from the other direction: in order to afford something that costs $7,000 (say, your rent or a loan repayment for a few months), you actually have to earn $10,000.

With salary packaging, the expense is paid before the tax office get their hands on your salary. This means that you only have to earn $7,000 to pay $7,000. This saves you a lot of money over the year.

Let’s look at another example:

Your gross salary is $80,000 and you pay $2,000 back on your home loan each month. Here is how your money looks when you do not salary package the $24,000 in home loan repayments, and when you with and without salary packaging:

 
Salary packaging the home loan repayments puts more than $5,000 in your pocket each year!

Salary packaging is one of our specialties, so please contact us if you think you may be eligible for this strategy yourself.