Salary Packaging Rental Expenses

Hi Nick,

Two questions:

1. To be able to do the Salary Packaging does it matter that an individual is employed permanently, on contract or self employed?

2. From your experience what method gives higher tax benefits, IP in one spouse's name or salary packaging, or they are about the same?

 

Hi Troppo
1. doesnt matter as long it is documented in your salary agreement. Important to note that it should be documented BEFORE the transactions occur not after.
If you are self employed then you do not receive a salary. - sole trader

2. Depends on the numbers. Happy to look at an example for you

NickM

 

Thanks Nick.

Let's assume one spouse's income is $95,500, rental income $17,000 and expenses $31,000 and second spouse's income around $5,999 a year.

I do not have an IP as yet, just looking at the possibilities, and above numbers are what I think might be.

Would it be possible for anybody to knock up a simple spreadsheet to calculate "Net disposable income without and with salary packaging rental expenses" for everybody to use without asking Nick all the time?

 

Tropo
i have looked into a standard template before but I think that there are too many variables.

The first port of call is your employer to see if they will do it.

If they are willing to participate then I can help guide you with the numbers.

NickM

 

There is a calculator you can use under the rental property salary sacrificing kit section of Ban Tacs Accountants - Rental Properties, Tax, Capital Gains, Fringe Benefit look to the bottom right on the home page.

julia

 

Salary Sacrifice of Rental Expenses

Hello Nick/Sim
When using the salary sacrifice of rental expenses strategy, does the property have to be jointly owned as joint tenants? If a husband sells 1/2 of his fully owned rental property to his wife so they now own 50% each, can they use this strategy?

Thanx

 

This brings up the national Australia Bank case in the other thread on joint loans.

Sounds like a reasonable argument, but might depend on your exact arrangement if the Commissioner is unhappy.

However, with domestic relationships and where both meet some expenses the Commissioner might presume joint ownership of property, especially if both names are on the mortgage - so get some advice before moving money around.

Cheers,

Rob

 

All that is necessary is for the high income earner to at least own part of the property ie 1% if owned jointly then it is automatically 50% but can still sacrifice

Julia
bantacs.com.au

 

Answers:
1) It will not work for a sole trader because they are not an employee. It should work if you contract through your own company or trust though this opens the arrangement up to possible Part IVA ie entered into the contracting arrangement to get this tax benefit. You see there is nothing wrong with entering into a salary package arrangement for a tax benefit it is setting up the company or trust that could catch you out. Permanent or temporary employees can do it if their employer agrees just make sure you enter into the arrangement before you earn the money you are sacrificing
2) Salary packaging will always give you a better outcome. The benefit is only marginal if both spouses are in the same tax bracket in that the only benefit is that Centrelink won't be adding back rental property losses and your employer will be able to get the GST back some of the rental property expenses. If spouses are in different tax brackets it has always got to give a better result because some of the income will go to the low income spouse (assuming this is greater than their share of depreciation) but all of the cash flow expenses come off the high income earners wage.

Nick,
Sounds like you could benefit from reading my kit. I have a generic version that I sell to Accountants for them to onsell.

Julia
bantacs.com.au

 

Hi Julia,

Some of this stuff is very out of date, when will you be updating them?

http://www.bantacs.com.au/booklets/Wage_Earners_Booklet.pdf

Talks about tax deductible contributions to super being $3,000 and then 75%, it's now all 100% up to $50,000 for under 50s and 100% up to $100,000 for over 50s.

Also the government co-contribution goes up to $58,980 and pays $1.50 for each $1, not $1 for $1.

Cheers,

Dan

 

Hi Julia, I don't think Nick will need your kit. Everything seems to be working just fine ...

Dave

 

Thanks for the offer Julia, but this is one reason why i only rely on my own research or on those people who are well respected in the industry as leaders in their respective fields.
Nickm

 

Dan,

It will be quiet a while before those booklets will be updated again but we update all our registered readers by providing them a newletter twice a month. This is also free to anyone.
Very busy at the moment finishing off a book on tax and Rental properties that should be out in April.

Nick,
If you are so well researched why couldn't you give better answers above. Just how much do you want to charge someone to calculate whether salary sacrifice will be helpful to them?
There is also a calculator on my web site that's free too.

Julia
bantacs.com.au

 

Julia
i dont recall mentioning anything about charging. if you read the post you will see that i asked the most important question first.

Will the employer allow the employee to do it ?

Unlike others I dont use every post as an opportunity to sell out of date material.

I trust your calculator is based on current tax rates and is up to date.

NickM