Salary packaging has become an important tool in providing tax effective and flexible remuneration packages for employees. In light of the current strong economic climate and tight labour market, salary packaging plays an important role in the ability to attract and retain staff. However, recent changes to the personal tax rates and thresholds has meant that existing salary packaging arrangements may no longer be tax effective. In addition, changes to the superannuation legislation has provided further opportunities in respect of salary packaging.
This paper outlines the fundamentals of salary packaging including an outline of the types of benefits typically included in salary packaging arrangements for taxable employers, exempt employers such as public benevolent institutions (PBI's) and rebatable employers. It then examines the recent legislative changes to the income tax legislation, FBT and superannuation legislation and how these changes impact salary packaging arrangements.maintenance