In today’s competitive job market, becoming an employer of choice requires more than just offering a great salary. Employees want benefits that add real value to their lives, and one way to stand out is through salary packaging.
By helping your staff make the most of their earnings, you can boost retention, attract top talent, and create a workplace that employees truly value. And here’s the bonus: the government has rolled out some timely incentives, like the Fringe Benefits Tax (FBT) exemption for electric and hybrid vehicles, making now the perfect time to revisit what salary packaging can do for your team.
What is Salary Packaging?
Salary packaging is a way for employees to use part of their pre-tax income to cover certain expenses, reducing their taxable income and leaving more in their pocket. As an employer, you can facilitate this benefit, allowing staff to save on expenses like cars, laptops, and superannuation.
Why Salary Packaging is a Game-Changer for Employers
Becoming an “employer of choice” means attracting and keeping the best talent, and salary packaging is one of the most effective ways to do that. Employees appreciate it when their employer goes the extra mile to offer options that let them stretch their income further, especially when it comes to big-ticket items like cars or additional superannuation contributions.
The FBT Exemption on EVs and Hybrid Cars: A Topical Tax Incentive
One of the most attractive salary packaging options right now is the FBT exemption on electric (EV) and hybrid vehicles (plug-in hybrid only). This exemption means that when employees choose an eligible EV or hybrid car, Fringe Benefits Tax will not apply to any private use. To be eligible for the FBT exemption, the car must be priced below the luxury car tax threshold for fuel efficient vehicles.
Benefits of the EV/Hybrid Car FBT Exemption
There are multiple wins for both employers and employees with this FBT exemption on EVs and hybrids, especially as more people look for ways to adopt greener practices.
Here’s why it’s worth considering:
Enhanced Employer Offering
By making EVs and hybrids an option in your salary packaging program, you’re aligning your company with sustainability – an increasingly important value for both employees and clients.
Reduced Fuel and Maintenance Costs
Electric vehicles come with lower running costs, including reduced spending on fuel and fewer maintenance expenses over time. This cost-efficiency makes the car more affordable for employees.
Support for Environmental Goals
Electric and hybrid cars emit fewer greenhouse gases than their petrol or diesel counterparts. For employers focused on corporate social responsibility (CSR), promoting EVs supports your environmental goals.
Important Timelines for the EV FBT Exemption
The current FBT exemption applies to eligible EVs and hybrid vehicles first used after July 1, 2022, and is set to last until 31 March 2025 (for a plug-in Hybrid EV) and mid-2027 for EV cars (at this stage). However, as with any tax incentive, it’s always a good idea to check with a tax professional for updates or changes to eligibility and timelines. Since this incentive is unlikely to last forever, now is the time for both employers and employees to make the most of it.
Other Popular Salary Packaging Options
Besides EVs and hybrids, there are several other effective ways to maximize the benefits of salary packaging:
Additional Super Contributions
Employees can use salary packaging to make extra contributions to their superannuation, boosting their retirement savings while reducing taxable income.
Portable Devices and Work Equipment
For employees who need tech tools like laptops or smartphones, salary packaging can help them purchase these items with pre-tax dollars.
Work-Related Expenses
Certain work-related expenses, such as professional memberships and subscriptions, can be packaged.
How to Get Started with Salary Packaging
Implementing or updating a salary packaging plan is relatively straightforward. To get started:
Consult with an Advisor
Tax rules around salary packaging can be complex. A tax professional can help design a program that works for both you and your employees and ensure compliance with ATO guidelines.
Communicate the Benefits to Staff
Employees may not be aware of salary packaging’s benefits, so consider a workshop or information session to explain their options.
Tailor Your Package Options
Customising your salary packaging options to reflect what your team values most will make the program more successful.
Offering salary packaging is a win-win for both employers and employees. By including valuable, cost-saving options, you can boost your team’s morale, save them money, and strengthen your brand as an employer of choice.
Embrace the benefits and give your staff a reason to stay and grow with your business!
The team at Cutcher & Neale are here to help, please get in touch if you would like further assistance.
Jace joined the firm in 2005 and has over 20 years' experience in the taxation and business services field. By immersing himself within the industry, he has developed a deep understanding of the financial and operational issues that face businesses and, as a result, provides tailored solutions to bring the best possible outcome to his clients.
Jace takes a holistic approach, allowing him to plan for all aspects of his clients personal finances including their practice / business, investments and superannuation.
