Archive for May 9th, 2012

2012-13 Federal Budget: A Salary Packaging Overview

Hi Readers – Simon Ellis here  posting about the 2012-13 Federal Budget.

NOW UPDATED: Please note the new information relating to the LAFHA budget changes impacting foreign nationals included below.

We’ve been doing budget updates here at Smartsalary for a while now and each year we seem to end up reviewing the announcement on another big salary packaging policy change.  Over the last five years we’ve seen changes to laptops, in-house meals and car benefits.

Thankfully the 2012-13 budget is a departure from this trend: it doesn’t contain anything unexpected or likely to have a significant impact on  those who are salary packaging.

In short, the budget includes the following salary packaging related policy announcements:

  • The living-away-from-home allowance benefit will be severely curtailed: it will no longer be available to employees coming into Australia from overseas and eligibility will be capped to a maximum of 12 months for domestic assignees.

The good news is that anyone currently salary packaging LAFHA will be able to maintain their packaging arrangements until the end of their LAFHA period OR until 1 July 2014 -whichever comes first. This means that LAFHA documentation will need to be reviewed to ensure end dates are clearly identified.

UPDATE: Despite indications within the budget speech that customers with current LAFHA arrangements will be able to preserve those arrangements through to 30 June 2014, it has subsequently been made clear that Foreign Nationals will not be able to access this transition concession.  That is, as per the announcements in last year’s mid-year budget, after 30 June 2012 you will only be able to claim LAFHA if you can identify an Australian address as your ‘usual’ residence. 

  • The car fringe benefit changes announced and implemented in last year’s budget are still on track and will continue as before.
  • The tax rate applied to salary packaged superannuation will increase to 30% for those with an income in excess of $300,000 p.a. This will reduce the benefit of salary packaging superannuation for these individuals but won’t eliminate it (given their 46.5% income tax rate).
  • The plan to allow employees aged 50 and over to retain the 15% tax concession on pre-tax contributions up to $50,000 (if their superannuation balance is below $500,000) has been postponed until 1 July 2014.  This means everyone’s cap will be $25,000 from 1 July this year, which will remain the case for at least the next two years.

The only other  point to consider from a salary packaging perspective is the Budget’s specific mention of the ‘Not-for-profit Sector Tax Concession Working Group’, a policy body convened to examine the question asked by both the Henry Review and the Tax Forum: whether existing tax-based support for the not-for-profit industry can be provided in a fairer, simpler or more effective way.

This means a review of the Threshold, Meal Entertainment and Holiday Accommodation benefits offered to Public Hospital and Not-for-profit employees is still on the cards in the not too distant future, but certainly no changes this year.  Smartsalary will, of course, work hard to ensure the perspective of  salary packaging employees is fully represented to this committee and we will report back if/when we hear more.

There’s not much more to report this year!  It may not make for a particularly compelling blog post,  but we’re happy that it will make it an easier year for our customers and their employers.

So package on people!

Leave a comment here.

Deven Billimoria
Chief Executive Officer

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