WHOEVER invented the term ‘salary sacrifice’ was no marketing genius.

For most people the word sacrifice means giving up something, even jumping into a volcano, and never something you want to do with money.

However, salary sacrificing can save workers thousands of dollars a year in tax, and not just with your superannuation.

Many workers do not realise they may be able to salary sacrifice – also known salary package – cars, computers, trade tools, childcare, mobile phones, insurance and even airline lounge memberships.

These costs are deducted from the workers’ salary before tax is deducted, which means they pay less tax on their income. However, not all employers offer salary packaging, so you have to ask them and hope they are nice about it.

Carla Costanzo started salary packaging a new car last month to save more than $50 a week in tax.

She says she is obsessed with budgeting and enjoys the convenience of having vehicle expenses such as tyres, maintenance and lease costs included in the salary packaging arrangement.

‘You know what you have left at the end of each week, and the figure doesn’t change,’ Costanzo says.

The idea of salary packaging was mentioned to her by her father, who was already doing it, so she approached her employer – Adelaide Fresh Fruiterers – and ‘they were fine with it’.

Vehicle Solutions Australia director Greg Harris says the employer must approve the service because it involves both GST and Fringe Benefits Tax, which are both employer taxes.

‘The process is very simple and costs nothing for any employer,’ he says.

‘However, some employers still resist the service as they think it will cost them time and money processing all of the paperwork. However, most salary packaging services are completely outsourced.’

Harris says even self-employed people can salary package ‘as long as you pay yourself a wage and pay tax on that wage’.

‘But it is always best for these people to talk to their accountant about their individual tax structure.’

A typical packaging arrangement may cost you about $400 a year but the savings should offset the fee, which can be included in the pre-tax package.

The biggest winners in the salary sacrifice stakes are people who work for public hospitals or not-for-profit organisations. They are also allowed to package rent, groceries, entertainment, credit card bills and other personal expenses up to a set limit.

H & R Block Tax Accountants says anything that reduces your taxable income is a good thing, and says that salary sacrifice arrangements must be entered into before you start earning the income.

‘It’s not well-known. It really does depend on the employer as to whether they offer it to employees,’ H & R Block regional director Frank Brass says.

‘The first step is to ask your employer if they are prepared to offer it. Most have a packaging company that does it for them.’

Posted by News Limited Network on 11th February, 2015