The 2014/15 Federal Budget: Salary Packaging Update

The Abbott coalition government handed down its first budget last night and, while it contained a range of measures designed to increase revenue and cut spending, it did not include any changes detrimental to the salary packaging opportunities available to Australian employees.

In fact salary packaging looks to be business as usual given the following:

  • the Statutory Formula Method for valuing car fringe benefits was left unchanged and so new vehicle packages will continue to have access to a concessional 20% valuation rate; and
  • the increase of the Superannuation Concessional Contributions Cap for employees under 50 from $25,000 to $30,000 will go ahead as planned from 1 July 2014 – opening up additional ‘room’ for superannuation packaging and assisting all employees to maximize their retirement benefits.

And the news was positive for employees of not-for-profit and Public Hospital employers:

  • it appears that there will be no erosion in the Threshold “Cap” benefit due to the planned increase to the FBT rate;
  • no changes have been made to any other salary packaging benefits typically available for employees of not-for-profit and Public Hospital employers

The budget did however contain a range of staffing changes to federal government employers which will result in movement of employees between federal departments and sadly, some employees leaving the system.  But Smartsalary is experienced in managing these changes and is committed to ensuring a seamless transition for any affected employees.

Overall it was a budget with minimal changes to salary packaging, and we will keep you posted with any further developments.

3 Responses to “The 2014/15 Federal Budget: Salary Packaging Update”

  1. 1 Rob May 16, 2014 at 2:03 pm

    “it appears that there will be no erosion in the Threshold “Cap” benefit due to the planned increase to the FBT rate;”

    What do you mean by this — won’t the amount able to be packaged under the $30,000 FBT cap decrease when the FBT rate increases? Thus lowering the value of the benefit for anyone earning less than $180K!

    Not sure if I’m missing some other provision.

    • 2 ceosmartsalary May 21, 2014 at 3:41 pm

      Hi Rob

      Simon here, schedule 2 to the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014 will (if passed by the Senate) increase the grossed up threshold available to PBI employees from $30,000 to $31,177.

      This means that the ‘real dollar’ value of the threshold cap will be preserved at $15,900 for the duration of the higher FBT rate.

      As an aside I have to note that yours is an insightful question – not many people understand the operation of the FBT caps well enough to identify the problem you’ve spotted. I guess we’re lucky that the actuaries within Treasury fall into that limited group!!

  2. 3 Rob May 26, 2014 at 6:29 pm

    Hi Simon,

    Thanks – that’s happy news.

    I guess the government truly mean this to be a limited time tax change with a scope limited to high income earners only.

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Deven Billimoria
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