Want to pay less tax? This sacrifice could be worth making

At first glance, “salary sacrificing” might sound like the last thing you’d want to do. But in reality, this strategy—also known as salary packaging—can be a smart move, especially when it comes to reducing your tax burden. By sacrificing a portion of your take-home pay in exchange for benefits from your employer, such as superannuation, motor vehicles, or electronic devices, you can effectively lower your taxable income and pay less tax.

Why Salary Sacrificing Works

According to Mark Chapman, director of tax communications at H&R Block, salary sacrificing offers significant tax advantages. For instance, when you opt for a car lease through salary sacrificing, you can include all running costs in your lease payments, saving you money on petrol and GST. Despite these benefits, many Australians still don’t fully understand salary sacrificing, potentially missing out on its advantages.

How to Get Started

If you’re considering salary sacrificing, here are some options to explore:

1. Super-charged Savings: By sacrificing part of your pre-tax salary into your superannuation fund, you not only reduce your taxable income but also boost your retirement savings. Just remember to stay within the concessional super contributions cap and be aware of when you can access your additional contributions.

2. New Wheels: Novated leases, where your employer pays for a vehicle lease on your behalf, can offer savings on car costs and reduce your taxable income. However, consider the implications if you leave your job, as novated leases remain your responsibility.

3. Tech Perks: Packaging electronic devices, like laptops and phones, for work-related use can lead to significant cost savings.

What You Need to Know

Before diving into salary sacrificing, it’s essential to:

  • Get a written agreement with your employer outlining the terms of the arrangement.
  • Understand potential fringe benefits tax implications, especially for novated leases.

Seek Professional Advice

While salary sacrificing can be beneficial, it’s crucial to seek professional advice tailored to your individual circumstances before making any financial decisions.

Ready to Optimize Your Finances?

Take control of your financial future with Boa & Co. Our experts can help you navigate the complexities of salary sacrificing, maximize your savings, and achieve your financial goals. Contact us today to schedule a consultation.

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