How Not for Profit Employees Can Benefit from Salary Packaging
Did you know that working for a Not for Profit organisation can save you money?
Salary Packaging for not for profit employees is one of the biggest benefits that come with the job. Salary sacrifice agreements between you and your employer allow you to increase your income by paying for certain expenses using pre-tax dollars.
Not for Profit (also known as NFP) employees are eligible for higher-level discounts and cost exemptions that are not available to private-sector employees.
NFP organisations with a charitable intention have tight budgets and scarce funds compared to private companies. Thus, cash benefits aren’t always practical.
However, salary packaging provides an opportunity for NFPs to employ such staff incentives, without tapping into charity funds.
Australia has about 600,000 not for profit organisations. That’s a lot of charities playing a critical part in the country’s economy. Salary packaging concessions help NFP staff to access a take-home pay that’s more competitive to the private sector.
If you work for an NFP organisation or looking to break into the industry, here are the salary packaging benefits you can get your hands on.
How Much Can a Not for Profit Employee Salary Package?
For most employees of for profit organisations, tax is usually taken from your salary before you spend it.
Whilst salary packaging doesn’t change the amount of salary you’re paid, it allows you to pay for selected expenses before you’re taxed. Expenses you would’ve paid anyway, after-tax.
Once the agreement between you and your employer is approved, part of your wage is ‘packaged’ into pre-tax dollars to pay for general living expenses. No income tax is payable on this money.
NFP employees can package up to $15,900 every year, which is the maximum capped amount.
Salary packaging is an option. For those that do use it, you will only pay tax on the remaining portion of your salary, significantly reducing your taxable income.
Can a Not for Profit Employee Salary Package a Vehicle?
If you work for an NFP organisation, you can benefit from pre-tax dollars by salary packaging a car.
Cars are generally purchased outright or through finance. But by salary packaging your car, you’re entitled to bigger savings and better organisation of car payments.
Car packages, also known as a novated lease, can be the most cost-effective way to purchase and run a vehicle. In comparison to buying a car outright, novated leasing consolidates all your car essentials into one payment, which is taken from your pre-tax earnings.
The benefits are significant, including savings in tax, vehicle running costs, GST and its purchase price.
Another advantage of novated leasing is you’ll have access to a fuel card to help organise all car-related expenses. Novated leases also enable staff to afford business car models that would otherwise be out of their price range if they were purchasing outright.
Salary packaged vehicles can be used for both business and personal use.
Can a Not for Profit Employee Salary Package Mortgage or Rent?
NFP staff may also benefit from salary sacrificing mortgage or rent payments tax-free.
Mortgages and rent can both be salary packaged to increase your take-home disposable income. Other regular fixed amount expenses, such as school fees and loan payments may also be paid for from your pre-tax dollars as part of a salary packaging arrangement.
Other personal expenses that can be salary packaged include:
- Regular claimed expenses such as credit card payments
- Flexible everyday expenses such as bills, groceries and fuel
- Remote area benefits
How Do Not for Profit Employees Benefit More from Salary Packaging?
Organisations that provide salary packaging benefits attract and retain employees better.
They are also exempt from Fringe Benefits Tax (FBT), which is generally paid by an employer when non-cash fringe benefits, such as laptops, cars and phones, are paid on your behalf.
The salary sacrifice arrangements and benefits (part of salary packaging) come into play when you choose to receive these non-cash benefits over a high cash salary.
NFP organisations benefit more than private or “profit” companies because they can offer non-cash benefits at a lower cost, making salary sacrificing much more attractive to employees.
If you want to reap the rewards of salary packaging, contact our staff for more information on how we can help!