Scope

  • Mandatory
Updated: 28 Jul 2020

Range of services

Salary packaging services

A salary package service consists of:

  • selected non-cash benefits
  • any relevant fringe benefits tax
  • the administration fee.

As advised in Premier’s Department Circular 2006-08, the restriction limiting salary packaging to 50% of an employees' superable or award salary has been removed. The amount of salary which can be packaged is now unrestricted.

However, employees will need to pay post-tax commitments and payroll deductions such as employee superannuation contributions, union fees, health fund premiums, maintenance orders etc before determining the availability of salary for packaging purposes.

Benefit items

Subject to any limitations prescribed by Taxation Law, NSW Government and customer agencies, the benefit items that are approved and which may be packaged by participants under the scheme are:

  • employee optional superannuation to First State Super and other complying superannuation funds
  • financial/taxation advise benefits (note: financial advice specifically regarding salary packaging is not part of this benefit)
  • motor vehicles - employees may have more than one car lease and suppliers will not charge any additional fee for additional leases. There will be no additional fee for luxury vehicles and there will be no restriction on car value
  • housing (remote areas only)
  • priority of access fee for child care, and child care (in-house only)
  • professional membership fees and subscriptions
  • taxi expenses
  • mobile phones (if used mainly for business purposes)
  • education expenses (self and professional)
  • portable computer, e.g. laptop or tablet computer such as an iPad (a portable computer can be salary packaged only if it is used by the employee primarily for work purposes and only one portable computer can be packaged per FBT year)
  • E-organiser/diary/PDA/calculator and briefcase
  • airline lounge membership
  • home office expenses
  • income protection insurance
  • newspapers and periodicals

Further details about these items are provided below.

Non-cash benefits

NSW public services employers should offer the benefits listed to employees.

Other employers may determine the range of benefits which may be salary packaged by employees.

Optional Benefit ItemsImpact of FBT

Additional Contributions to First State Super

Not a fringe benefit

Additional Contributions to other complying Funds

Not a fringe benefit

Motor vehicles

Concessionally taxed

Taxi expenses

Exempt

Child Care (on employer’s premises only)

Exempt

Housing – remote areas only

Exempt

Laptops, e-organisers and briefcases

Exempt

Priority of access fee for child care

Exempt

Mobile telephones (primarily used for business purposes)

Exempt

Professional Subscriptions

Otherwise Deductible

Education Expenses (self and professional)

Otherwise Deductible

Note: 'Otherwise deductible' means that the FBT liability is reduced to the extent that an income tax deduction would have applied if the expense was met out of after-tax salary.

Additional superannuation contributions

Employees may salary sacrifice additional contributions to superannuation. These pre-tax contributions can be made to the First State Superannuation Scheme or to any complying superannuation fund. Salary sacrifice contributions may only be made to one fund, not to multiple funds.

Note that information regarding NSW public sector superannuation schemes is available at www.statesuper.nsw.gov.au or www.firststatesuper.com.au. If you have a general superannuation enquiry please telephone the schemes’ customer service numbers;

State Superannuation Scheme (SSS)
Tel:  1300 130 096

State Authorities Superannuation Scheme (SASS)
Tel:  1300 130 095

Police Superannuation Scheme (PSS)
Tel:  1300 130 097

First State Superannuation Scheme (FSS)
Tel:  1300 650 873

Novated motor vehicle lease

A novated motor vehicle lease is a 3-way arrangement between a finance company, an employee and an employer. The vehicle is registered and insured in the employee’s name.

The employee leases a vehicle of their choice under a finance lease from one of the financiers nominated by their Salary Packaging Provider under this contract. Public sector service employees can now novate V8 powered vehicles as a benefit item in their salary packaging from 13 August 2019 onwards.

A Deed of Novation is then entered into between the employee, the employer and the financier under which the employee’s obligation to pay the lease rentals under the finance lease is rescinded for the term of the lease, provided that the employee’s salary packaging arrangement remains current. NSW public sector employees may only enter into a novation arrangement using the NSW Crown Solicitors Deed of Novation.

Under the novation, the employer assumes the obligation to pay the lease rentals and the employee has the obligation to pay the residual or remaining value on completion of the lease. The amount of the lease payments will be deducted from the employee’s pre-tax salary.

The novation agreement will usually run for the term of the finance lease.

Other benefits

Remote area housing benefit

An employee may salary package rental payments in respect of accommodation provided by their employer in a remote area. The definition of remote is prescribed in the tax legislation. The remote area must be the employee’s usual place of employment. A number of conditions have to be met, including:

  • the nature of the business means that employees are likely to move frequently from one residential location to another
  • there is insufficient suitable residential accommodation available in the area in which the employee is employed.

FBT and GST do not apply to the provision of this benefit. It is not a reportable fringe benefit and is not included on an employee’s payment summary.

In-house child care

An employee may salary package the cost of child care fees paid in respect of care provided for their children in a child care centre located on their employer’s business premises.

Employees should note that if they salary package all of their child care fees, they are not eligible to receive the Child Care Benefit (CCB) or the 30% childcare rebate for out of pocket expenses.

FBT and GST do not apply to the provision of this benefit. It is not a reportable fringe benefit and is not included on an employee’s payment summary.

Priority of access fee for child care

Employees may salary package payments made to obtain priority access to certain child care facilities for their children.

The payments must be made under eligible programs administered by the employer to a child care service that is one of the following:

  • an eligible child care centre for the purposes of any provision of the Child Care Act 1972
  • family day care
  • care outside school hours, or
  • care in school vacations.

FBT does not apply to the provision of this benefit.

Professional memberships and subscriptions

An employee may package the cost of annual subscriptions or fees paid to a professional association or trade union and / or annual subscriptions for business journals, magazines and similar publications. There must be a direct connection between an employee’s employment and the membership of the organisation or trade union.

Where the professional memberships and subscriptions are work-related they are not reported on the employee’s payment summary. FBT does not apply.

Taxi expenses

Employees can salary package taxi expenses if certain conditions are met. These include where:

  • the expense arises from a single trip by a taxi beginning or ending at the employee’s workplace, or
  • the taxi trip arises because of an employee’s sickness or injury and is between the employee’s workplace, residence or any other place that it is necessary or appropriate for the employee to go as a result of the sickness or injury.

Mobile telephones

An employee may salary package the cost of a mobile telephone and the associated call costs if the mobile is used primarily for business purposes.

FBT does not apply to this benefit but GST applies to mobile telephones and account. The benefit is not reported on the employee’s payment summary as a fringe benefit.

Self-education expenses

Employees can salary package self-education expenses that are directly related to their current employment.

This includes:

  • the cost of a prescribed course of education including textbooks and equipment relevant to the course of study; and
  • Registration fees incurred in relation to work-related conferences and / or seminars.

Payments to the Higher Education Contribution Scheme (HECS) cannot be included.

Where an employee’ self-education expenses are work related they are exempt from FBT and they are not reported on the employee’s payment summary as a fringe benefit. GST is not generally payable on education costs.

Laptop computers, e-organisers and brief cases

An employee may salary package the GST inclusive cost of one laptop or notebook computer each FBT year (1 April to 31 March) without being liable for FBT.

The ATO considers that the primary features of a laptop computer are that it is relatively small in size, that it is portable and can be operated without an external power source. The computer can include built-in internal and external equipment required for its basic operation, but the cost of repairs, maintenance and software costs cannot be salary packaged.

The computer can be purchased outright or acquired through a lease agreement or other financial arrangement. Where the computer is leased, only the original cost can be salary packaged.

Note that the packaging of an e-organiser / PDA is not limited to one per FBT year.

Key contract features

The purpose of this contract is to offer executives and non-executive employees from all NSW Government public sector agencies and other authorised users an opportunity to use approved suppliers for the provision of salary packaging administration services.

All NSW Government agencies, other than State Owned Corporations, must use this contract if they outsource any of their salary packaging administration. The requirement to use NSW whole-of-government contracts, where they are available, was advised in Premier’s Memorandum
2006-11.

From an employee’s perspective the service providers are required to satisfy the following performance requirements:

  • arrange regular and on-time payment of an employee’s selected benefit items
  • provide a full reconciliation of an employees salary package at prescribed intervals;
  • provide timely advice to employees in relation to their salary packaging enquiries;
  • maintain information to enable benefit payment substantiation for the Australian Taxation Office Compliance and Audit requirements;
  • provide regular status reports to employees as prescribed by this Contract, and
  • resolve all written complaints received from an employee within 5 working days. See section 5 for details.

What is salary packaging?

Salary packaging enables employees to choose whether to take their remuneration as cash salary or select a mix of cash salary and non-cash benefits to suit their individual needs. Employees may determine the mix of salary and benefit items that constitute their salary package subject to the range of benefits offered by their employer.

When employees elect to package their remuneration, their cash salary continues to be subject to PAYG income tax. Under the Fringe Benefits Tax (FBT) legislation, their employer is liable for FBT which may apply on the non-cash benefits. Eligible employees who participate in salary packaging are required to meet the FBT cost associated with the benefits selected.

Participation in salary packaging is voluntary and employees may continue to take all of their remuneration as cash salary.

Financial planning

It is strongly recommended that all employees electing to participate in salary packaging, or vary an existing arrangement, seek professional, independent financial advice, which takes into account their particular circumstances.

A list of qualified and licensed financial planners is available from the Financial Planning Association website.

Flexible salary packaging requires employees to have an active and ongoing involvement in the monitoring of their individual packaging arrangements.

Key benefits

Generally the most attractive benefits for salary packaging are those that do not attract FBT such as superannuation, those that are exempt from FBT such as laptops, and those that are concessionally taxed for FBT such as motor vehicle leases.

Insurance

Broadform public and products

$10 million for any single occurrence and unlimited in the aggregate as to the number of occurrences. The total aggregate liability during any one period of insurance for all claims arising out of the supplier’s services shall not exceed $10 million.

Professional indemnity

Minimum $5 million.

Workers compensation

As required by the laws of each relevant state and territory.

Eligibility to use contract

Subject to agency convenience, and subject to any limitations that may be prescribed by the NSW Government or the customer agency, the following employees are eligible to participate in Salary Packaging Services:

  1. permanent employees including permanent part-time employees
  2. temporary employees
  3. casual employees (casual employees are only eligible to salary package superannuation).

Complaints and disputes

If case of a dispute, both the buyer and the supplier must use their best efforts to resolve it.

The buyer should speak to the supplier's customer service representative first. If they can't solve the matter together, the buyer should then contact NSW Procurement.

If the dispute cannot be resolved by mutual agreement of both parties in consultation with NSW Procurement, it will be referred for expert determination. This more formal process will need a higher level of detailed documentation, correspondence and records.