In The Media - The Age - Reap the Harvest

Budget changes mean you must review your investment planning

In Annette Sampson’s article appearing in The Age on May 28, she covered selected items from the Federal Budget handed down on May 13, and sought Taxpayers Australia CEO, Tony Greco’s input. This is a transcript of his contribution to this article.

The Tax Cuts

On more strategic level, Taxpayers Australia’s chief executive, Tony Greco, says employees should review salary packaging arrangements in light of lower marginal tax rates.

“The fringe benefits tax rules are quite complex and different benefits are valued differently for tax purposes but you should look at your benefits and recalculate the numbers to ensure packaging is still tax effective,” he says.

“FBT is levied at the highest marginal tax rate of 46.5 per cent. Anyone on a lower tax rate who was packaging fully taxed fringe benefits would have to have rocks in their head.”

Greco says benefits such as cars may still be tax effective but they need to be re3viewed. “If you leave things untouched you could get to the end of the financial year and find out it had cost more than if you’d taken your salary and paid for the benefits after tax,” he says.

Salary Sacrifice

Greco says salary sacrifice arrangements must be prospective (that is, you can’t sacrifice salary that you’ve already earned) and so are ideally set in place at the start of the financial year. Employees should also check that their employer will still calculate benefits such as compulsory super on their total package (including the sacrificed amounts). Some employers use salary sacrifice to short-change employees on these entitlements.

Means Tests

From July 1 next year, salary sacrificed into super will be included in the means test for a range of government benefits including the super-co-contribution, income support, family assistance, child support, the baby bonus, the Medicare levy surcharge and the Commonwealth Seniors Health Card.

Even after the changes, Greco says, higher income earners may still be able to qualify for government benefits through careful salary packaging as some benefits – mainly cars and meal entertainment – are valued concessionally for FBT. So their full value will not appear on your group certificate. He says if you have a work-related laptop, it also won’t be included.

The Age
Wednesday May 28, 2008
Reap The Harvest
By Annette Sampson