Your salary packaging deductions
If you salary package for a full Fringe Benefits Tax (FBT) year (1 April to 31 March) the maximum you can salary package is either $611.54 per fortnight or $305.77 per week. Salary packaging this amount means you are making the most of your benefit, but you can choose to salary package a lower amount if you prefer.
Sometimes you can salary package the maximum allowed, but your salary packaging deductions can be above or below these amounts.
27 fortnightly or 53 weekly pays
Although you receive your pay at a regular frequency (unless you are a casual employee), the number of pay cycles that fall into an FBT year can change. For example, if your pay day falls on 1 April one year and 31 March the next, you’ll have 27 pays that year. However, the maximum amount you can salary package each FBT year is fixed.
If your employer has an additional pay cycle in any FBT year, and you are packaging your full threshold, we will change your salary packaging deduction for that year to ensure the extra pay cycle doesn’t take you over the annual threshold.
We will adjust your payments in the following way:
- If you have only one payment (ie. mortgage or rent) we will adjust this payment
- If you have two payments (ie. mortgage and credit card) we will adjust the second payment (credit card). If the maximum you are salary packaging is not enough to cover both payments, we will adjust the mortgage and stop the deduction for the second payment.
- We will apply this same process if you have three payments or more.
You need to check your payments carefully once we make this change, as it may result in a shortfall in an existing payment such as rent or mortgage.
Maximising your salary packaging
If you start salary packaging part way through the FBT year, you can still take advantage of the annual salary packaging limit. This is known as maximising and means the amount deducted each pay is the most you can package each pay cycle, based on your salary and the annual limit.
From the new FBT year, 1 April onwards, your payments will reduce to allow you to salary package for the full FBT year.
Here’s how it works
Let’s say you earn $70,000 each year and you are paid fortnightly. You start salary packaging in January and have 7 pay cycles before the 31 March. You can salary package $2,271.42 of your pay each fortnight.
This would mean that most of your pay for this period is exempt from tax and would save you $5,486 in tax between January and March.
From 1 April your salary packaging would then be adjusted so you pay the standard fortnightly deduction of $611.54 every pay for the full FBT year.