Sacrificing salary may not seem like a way to actually save money, but by taking advantage of income restructuring you can pay less tax on the money you receive as salary.
Under salary packaging arrangements, personnel may choose to receive salary as a combination of cash plus approved benefits that are tax-free or taxed at concessional rates.
The Australian Taxation Office approves of employees salary packaging, by replacing some of their cash salary with benefits that lower taxable income. The Government also supports salary packaging, especially sacrificing into superannuation because it encourages investment in retirement benefits that ultimately takes pressure off social security payments such as the age pension.
Personnel can customise their salary package by choosing benefits that best suit individual needs. It provides the option to include a range of benefits that offer both convenience and the advantage of using income more effectively.
Items which can be accessed under a salary sacrifice arrangement include motor vehicles, income protection insurance, work related travel that Defence approves but does not pay for, which might include fares, meals and accommodation, and self-education expenses which are work related.
Savings gained by salary packaging compared to paying for the same expenses without packaging may be significant and will depend upon salary, the benefits selected, the amount spent on those benefits and other personal circumstances.
All permanent ADO members are eligible to salary package and ADF personnel and civilian employees located overseas are able to participate in salary packaging but are unable to package motor vehicles.
Reserve members on Continuous Full Time Service are able to salary package during their period of employment, provided that the arrangements can be accommodated within the period of employment.
Salary packaging is voluntary and can be entered into at any time.