Salary Packaging provides you with a way to use pre-tax funds to pay for certain items if you are eligible. If you work for a public benevolent organisation you may be eligible for this benefit (eg. Public Health, Research Institutes).
What are the benefits
Instead of your income being taxed, coming to you, and then being spent on items, packaging allows you to pay for items up to a cap with money directly from your pay (i.e. before tax). This means a new intern starting on around $70,000 p.a. and on current tax rates would have received a benefit of approximately $2700 from packaging their rent (which had to be paid anyway!). Some fortunate doctors are eligible for more items like meal cards, parking, gym payments and a few other specific items which makes packaging even more attractive. As you progress through your career as a medical professional your income will increase significantly, and your overall tax benefit from packaging will increase as well.
What can I package?
There are a whole host of expenses which doctors can package and these vary slightly from employer to employer. The main ones include:
- Rent/mortgage costs (for principal place of residence – not investment properties)
- Car running expenses (fuel, oil, services, insurance, etc – does not include later additions e.g. bulbar)
- Private travel and accommodation (holidays!)
- Meal and entertainment card (Tax free meals with friends and family including takeaway! Not available to QLD Health)
Are there disadvantages?
It can be time consuming.
Time is a commodity which most doctors are short of. It can be difficult to find the time to see what benefits to package, what documents and forms need to be sent in, resolving any issues and checking every month or two that all is running smoothly.
It has heavy penalties if not managed correctly:
Fringe benefits are treated as if they are income and are usually taxed, however as a doctor at a public benevolent institution (e.g. QLD Health hospital, Mater, Wesley) you are given a grossed up exemption of approximately $17,000 from this tax. Grossing up refers to the way that the ATO ‘sees’ the benefit, and without going into the complex details it means that you get a tax free amount of between $8236 and $9010 – this is where the benefits from packaging come from. Fringe benefits tax assumes you are on the highest pay rate (earning over $180,000 a year) and slogs you with the top tax rate on the grossed up amount if you go over this cap limit. The cap limit changes depending on whether you are claiming GST or non-GST items, and is easy to lose track of. On top of that, other benefits from employers are sometimes classed as fringe benefits and will count towards your cap, for example living away from home allowances and car usage. Further to this if you work for a hospital which doesn’t have PBI status (e.g. Greenslopes), you don’t get access to the exemption cap and thus the benefit of packaging – this also includes some secondment situations.
What we do
As we already look after a large number of doctor’s Salary Packaging accounts, we know the ins and outs of the rules and know what benefits are the best to package. What we are able to do is find out what eligible expenses you have, ensure that the claims are correctly filled out and sent in on time and iron out any issues when they arise. We know how your packaging is best administered, what works and how to get results. With Qhealth we also monitor your account to check that everything is going as planned and that you are on track to hit the cap without exceeding it. We also are able to advise which one off events like seconding to another hospital, rural relieving or locum work will affect your account and how we can minimize or negate any negative effects. If you ever have any questions or issues with your account, all you have to do is let us know so there’s no ten minute calls or worries about which form is correct and how to fill it in correctly for you.
To find out how Walshs can assist you with your Salary Packaging please contact Matthew Gellweiler on 07 3112 5450
