What is Salary Packaging? – Why Consider Salary Packaging?
Find out what YOU could be driving… and how much YOU could be saving…
The recent budget triggered some big changes from a salary packaging viewpoint. The main change affects the treatment of salary packaged cars around tax.
The most important consideration for Victorian Teachers around the recent budget is this:
A large percentage of Victorian Teachers travel under 15,000 kilometers per year.
This means that there is now a huge pool of teachers who can now potentially benefit from salary packaging their car…
Is this you?
“The tax savings on salary packaging a car can be significant, and allow you to drive a better car than you perhaps thought possible…”
Find out what YOU could be driving… and how much YOU could be saving by Salary Packaging…
Or read on…
Anyone who has been salary packaging a car are up to this point would know that cars have been valued for tax purposes based on the number of kilometers they have traveled. This achieves a decreasing valuation rate as you travel more kilometres.
The change in the recent federal budget means we’ll now be moving to a flat 20% valuation rate. This is to be transitioned in over the next four years. This will mean that all cars will be valued at the same rate regardless of the kilometres that they traveled. The impetus behind this change is obviously an environmental one as well as a budgetary one.
It is anticipated that by moving into a flat rate it would reduce the incentive for individuals to drive further – this to lead to a positive outcome for the environment.
Find out what could YOU be driving… and how much YOU could be saving…
How could the budget changes impact Victorian Teachers looking at Salary Packaging a car?
The most important thing to note is for teachers who are currently salary packaging a car is that these teachers will not be impacted by the new rates.
Teachers who are already set-up as far as salary packaging their cars (or their lease expenses) go will still be able to access the re-evaluation rates that are based on kilometres traveled. Bottom line: teachers who are already salary packaging a car won’t be at a disadvantage.
The next thing to note is those teachers who are thinking about entering into a car package. These teachers will not be able to access the 7 and 11% statutory rights anymore.
This doesn’t mean that those employees won’t save money by salary packaging a car, in most cases they still will save a significant amount, they just won’t save as much as they previously would have if they have been able to access the 7 and 11% percent rate.
Again, the most important consideration for Victorian Teachers is this:
A large percentage of Victorian Teachers travel under 15,000 kilometers per annum. This is a massive pool of Teachers who can now potentially benefit from salary packaging their car.
What can Victorian Teachers who are salary packaging, or thinking of salary packaging a car take away from the recent budget?
The impact of the budget will be different depending on whether a teacher is currently salary packaging a car, or thinking about packaging a car. If you currently package your car, the main message to you is that nothing is going to change.
The budget that you set-up at the beginning of your lease, that is the pre-imposed tax amount, the after-tax saving that you’ve modeled the lease around will remain unchanged, and continue through the end of your lease.
If however you’re thinking about salary packaging a car, the budget has a slightly different implication for you. First of all if you are a teacher who DOES NOT do a lot of kilometres – say less than 15,000 kilometers per annum, this budget can actually be a good thing for you.
It would give you access to the 20% statutory rate whereas previously you would have been locked in to a higher rate. So in fact the tax savings available to you as a result of salary packaging will increase as the result of the budget.
If however you’re a teacher thinking about packaging a car, and you do a lot of kilometres, that is you travel more than 25,000 kilometers per annum, then this budget means that the tax saving available to you from salary packaging will decrease.
There will still certainly be a substantial tax saving in salary packaging your car, but not quite as significant a saving as was under the 7 and 11% valuation rate.
How could Teachers working Charities be affected?
There was an additional change in the budget that is set to have a small impact on certain teachers who work for charities. Essentially teachers who are involved in commercial activities relating to those enterprises will not be able to access some of the threshold benefits.
Employers of teachers who operate in this space will likely have a very good understanding of how much (if at all) this could impact their employees, and be able to clarify any potential concerns for you.