Watch our video analysis of the 2012-13 Federal Budget. Simon Ellis, our Senior Tax Specialist, outlines his thoughts on the budget and how they will impact salary packaging. A written summary can also be found here.
2012-13 Federal Budget Analysis: Video
Published May 11, 2012 Henry tax review , Business Update , Legislative Changes , Super , Novated Leases , Community Update , Tax Review , Smartsalary Update , Announcement , Living Away From Home Allowance , 2012-13 Budget Leave a Comment2012-13 Federal Budget: A Salary Packaging Overview
Published May 9, 2012 2012-13 Budget 16 CommentsHi Readers – Simon Ellis here posting about the 2012-13 Federal Budget.
NOW UPDATED: Please note the new information relating to the LAFHA budget changes impacting foreign nationals included below.
We’ve been doing budget updates here at Smartsalary for a while now and each year we seem to end up reviewing the announcement on another big salary packaging policy change. Over the last five years we’ve seen changes to laptops, in-house meals and car benefits.
Thankfully the 2012-13 budget is a departure from this trend: it doesn’t contain anything unexpected or likely to have a significant impact on those who are salary packaging.
In short, the budget includes the following salary packaging related policy announcements:
- The living-away-from-home allowance benefit will be severely curtailed: it will no longer be available to employees coming into Australia from overseas and eligibility will be capped to a maximum of 12 months for domestic assignees.
The good news is that anyone currently salary packaging LAFHA will be able to maintain their packaging arrangements until the end of their LAFHA period OR until 1 July 2014 -whichever comes first. This means that LAFHA documentation will need to be reviewed to ensure end dates are clearly identified.
UPDATE: Despite indications within the budget speech that customers with current LAFHA arrangements will be able to preserve those arrangements through to 30 June 2014, it has subsequently been made clear that Foreign Nationals will not be able to access this transition concession. That is, as per the announcements in last year’s mid-year budget, after 30 June 2012 you will only be able to claim LAFHA if you can identify an Australian address as your ‘usual’ residence.
- The car fringe benefit changes announced and implemented in last year’s budget are still on track and will continue as before.
- The tax rate applied to salary packaged superannuation will increase to 30% for those with an income in excess of $300,000 p.a. This will reduce the benefit of salary packaging superannuation for these individuals but won’t eliminate it (given their 46.5% income tax rate).
- The plan to allow employees aged 50 and over to retain the 15% tax concession on pre-tax contributions up to $50,000 (if their superannuation balance is below $500,000) has been postponed until 1 July 2014. This means everyone’s cap will be $25,000 from 1 July this year, which will remain the case for at least the next two years.
The only other point to consider from a salary packaging perspective is the Budget’s specific mention of the ‘Not-for-profit Sector Tax Concession Working Group’, a policy body convened to examine the question asked by both the Henry Review and the Tax Forum: whether existing tax-based support for the not-for-profit industry can be provided in a fairer, simpler or more effective way.
This means a review of the Threshold, Meal Entertainment and Holiday Accommodation benefits offered to Public Hospital and Not-for-profit employees is still on the cards in the not too distant future, but certainly no changes this year. Smartsalary will, of course, work hard to ensure the perspective of salary packaging employees is fully represented to this committee and we will report back if/when we hear more.
There’s not much more to report this year! It may not make for a particularly compelling blog post, but we’re happy that it will make it an easier year for our customers and their employers.
So package on people!
Smartsalary’s iPhone app is available for download!
Published April 27, 2012 iPhone app Leave a CommentSeveral months ago, we saw the possibility for a salary packaging Smartphone application. This led us to research what functionality you’d like to see and use, the findings of which drove us to develop an industry-leading iPhone application, which we launched in November 2011. The initial response has been overwhelmingly positive.
Since then, we’ve added more functionality and released an Android version of the app, and we couldn’t be more pleased with your uptake and feedback. 11,600 of our salary packaging employees are now using the app.
For those of you with busy lives, we’re glad the application lets you keep tabs on your salary packaging accounts on the go. Whether it’s knowing how much you have available to spend or claim, checking your transaction history, or even finding out how much you’ve driven lately, our app can help.
Current vehicle-related features include:
- Account information, such as balance and transaction history
- Vehicle tracking and odo reading submission
- Service station locater
- Vehicle budget tracker
For those of you working in healthcare, the app provides:
- Smartsalary card balances and transaction history
- Tax-free cap management
We plan on continuing to add handy new features throughout the year – in our next release, we’ll be adding the ability to find car parking facilities and their rates.
If you have any feedback on the app, or ideas on additional features that you would find useful, please let us know in the comments section!
Download the app now!
iPhone users: click here
Android users: click here
…and they are really quite exciting!
Over the last 4 years, Smartsalary has been participating in the AON Hewitt Best Employer employee engagement survey. As you can see, we’ve been able to increase our employee engagement scores steadily over that time.
Staff engagement scores across the broad spectrum of companies in developed western economies, like across Australia, have been about 20% – that’s right, only 1 in 5 employees in Australia is considered to be “engaged”.
While that doesn’t sound great, it is important to know that the bar is set pretty high – being an “engaged employee” is a lot more substantial than merely being “satisfied” with work. According to Wikipedia, for example, “an engaged employee is one who is fully involved in, and enthusiastic about their work, and thus will act in a way that furthers their organisation’s interests.” Pretty lofty standards!
And so you can imagine how pleased we are to see our score climb from 48% four years ago up to 72% in the current survey. While 72% comfortably meets the minimum staff engagement threshold required for the AON Hewitt accreditation, their Best Employer framework comprises further stringent criteria regarding company “people practices” – where we fell short by the smallest of margins. Our march therefore continues steadily onwards as we look forward to working through the valuable feedback we’ve collected in this year’s survey.
Why is this important to you?
Without an ultra engaged workforce, I personally have little confidence we would have any chance of providing the highest levels of customer service that you, our valued customers, deserve. And without the full trust and loyalty of our customers, as far as we are concerned, we really don’t have much!
Hey, we’re not perfect! But rest assured that we’ll be giving our all to try to deliver the highest quality service to you, day in and day out!
Introducing Smartfleet: Australia’s smartest fleet manager
Published March 16, 2012 Fleet Management 2 CommentsWhen Smartsalary first started in 2001, customer service in the salary packaging industry was not particularly inspiring. In fact, about 75% of Smartsalary clients today were once with another provider and switched to us principally due to poor service delivered by their incumbent. Due to increased competition by newer entrants over the past decade, the overall service provision today within the salary packaging industry is generally better.
Best practice Fleet Management
A couple of years ago, as we were considering our entry into the fleet management industry, we found that similar improvements could be made to the service levels in that industry, just like in the salary packaging industry. So we got to thinking . . . how could we make a contribution?
Over the past two years, Smartsalary has acquired two independent fleet management companies – Webfleet (founded in 2002) and Australian Vehicle Consultants (AVC – founded in 2001). They are complementary businesses; Webfleet’s key strength is its comprehensive web-based system whilst AVC Fleet offers premium maintenance and authorisation functions. Today, Webfleet and AVC manage 35,000 vehicles across Australia, and have been re-branded as Smartfleet.
Smartfleet’s point of difference is to be able to offer either a totally outsourced fleet management solution, or a software solution that can be managed in-house by the client – and for our salary packaging clients, we can now offer a one-stop shop. Our long-term vision can be summed up by our tagline – to be widely recognised as the easiest fleet management company to deal with.
For a better idea of what Smartfleet can offer, have a look at our brand new website: www.smartfleetaustralia.com.au.
We think the future of Smartfleet is bright. We will pour our hearts into servicing the fleet industry, much as we have the packaging industry over the past decade . . . and we look forward to being of service.
iPads & Tablet computers: Salary Packaging update
Published February 24, 2012 iPads , Tablet Computers 7 CommentsHi Readers – Simon Ellis here, blogging about iPads and Tablet computers…
With the upcoming release of the iPad 3 (iPad 2s?) we thought now was a good time to update our customers on the state of play regarding salary packaging and tablet computers – which are growing fast as a salary packaging option.
Lots of our employers allow laptop packaging but in just a couple of years, the number who now allow an iPad/tablet alternative has grown to nearly 25% from almost zero.
“Why the change?” I hear you ask. What’s different for an employer now that wasn’t different a few years ago?
Well, initially there was resistance from employers within the industry when it came to packaging these items. It was assumed that employees with iPads/tablets would struggle to meet the eligibility test for packaging – i.e. that the device must be used primarily as an employment tool.
However that perception is starting to change as employers come to recognise:
- that the business-use potential of iPads and Tablet computers is greater than previously thought and more people are using the devices in their day-to-day employment activities, and
- that many employees use an iPad/tablet in conjunction with a laptop to provide a more complete mobile computing solution.
To be clear, the “primarily for employment purposes” eligibility test still applies and the assumption that iPads/tablets are unsuitable for certain business roles is still valid in some cases. The rules haven’t changed – what’s changed is our general understanding of how iPads and tablets can be used as a business tool.
So what does this all mean for someone thinking about packaging an iPad or tablet computer?
It means that if you use (or intend to use) an iPad/tablet computer in your day-to-day employment then you should raise the option of salary packaging such items with your employer – if it isn’t already offered.
And if it is already offered . . . then you should probably think about taking advantage of the tax savings available!
* Smartsalary customers should check their employer’s salary packaging rules, accessed via login to their packaging account, to confirm the tablet/portable computer packaging options available to them.
Several years ago I had the pleasure of listening to the Dean of Harvard Business School, Nitin Nohria, lead a discussion on leadership. The discussion focussed on a paper that he co-authored in 2003 titled What Really Works. This paper was the result of a 10-year study that sought to uncover the business practices of companies he termed as winners – that is, companies that consistently outperformed their peers. According to the study, there are 4 primary practices that all winners employed. At the top of that list was to devise and maintain a clearly stated, focussed strategy. The focus here was not just on having a concise, coherent strategy, but also one that every member of the organisation understands and appreciates . . . after all, what hope does a company have of executing a strategy that isn’t absolutely clear to everyone who works there!
With that in mind, we created our Strategy Triangle to simply articulate the few concepts that we thought were central to the Smartsalary Way of doing things. The key principles include:
(a) an Engaged Workforce (as measured by the likes of AonHewitt), and
(b) Lean Systems and Processes (as outlined in The Toyota Way), would help to drive
(c) Customer Loyalty (which we have chosen to measure using Net Promoter Score).
And just this year, we are enhancing our triangle with 2 further practices:
(d) Agile development (which is actually a whole-of-business initiative), and
(e) Innovation (we’ve adopted a methodology outlined in Clay Christensen’s The Innovator’s DNA).
Taken together we have the new 2012 Smartsalary Strategy Triangle. As you can see, it all starts with Staff Engagement at the base of the triangle, and builds with practices like Lean, Agile development and Innovation to help drive our end goal at the tip of the triangle, which is Customer Loyalty. This should help us achieve our company vision, which is: To be widely recognised as the easiest salary packaging and fleet management company to deal with.
Each of our practices have a capability maturity framework attached to it, which helps us keep track of how we are progressing against our important goals at a granular level. And then we have company-wide KPIs whereby everyone across the organisation has a component of their remuneration determined by how well the company performs against these KPIs.
We’re not there yet, far from it. We know how far we’ve come, but we also know how much farther it’s possible to go in our journey.
We are in the process of rolling out this triangle throughout the company. Hopefully with this clarity of purpose, we can endeavour to be as good to you, our valued customers, as you have been to us!
Novated Leases: 8 months on from the 2011/12 Federal Budget Changes
Published January 24, 2012 Legislative Changes , Novated Leases 2 CommentsHi Readers – Simon Ellis here guest posting about the 2011/2012 novated lease budget changes.
It’s been just over eight months since the 2011/12 budget changes were implemented and now that the dust has settled we thought it would be a good time to review the new landscape for salary packaged cars.
Following the budget changes there are now 2 types of packaged vehicles in Australia:
- Vehicles leased before the 2011/12 Budget; and
- Vehicles leased after the 2011/12 Budget.
All vehicles can still use the Statutory Formula FBT valuation method – where the tax payable on the car is calculated as a % of its purchase cost – however the Statutory Formula percentages are now different depending on whether the pre-Budget or post-Budget rules apply.
Each of the above vehicle types is examined in more detail below.
Vehicles leased before the 2011/12 Budget
Novated leases that commenced on or before 10 May 2011 are, in most cases, valued for FBT purposes using the ‘old’ Statutory Formula rates:
|
Kilometres Travelled |
All Years |
|
0 – 14,999km |
26% |
|
15,000 – 24,999km |
20% |
|
25,000 – 39,999km |
11% |
|
40,000km + |
7% |
Unsurprisingly, packaging activities for employees with a pre-Budget lease remain largely unchanged. In particular, annual km targets are still relevant: low km drivers are penalised by a high (i.e. 26%) valuation rate, while high km drivers are still able to access very attractive low rates.
It is equally important to note that an exception applies to pre-budget cars for which a “commitment event” has occurred post-budget. “Commitment events” result in a vehicle moving from the old Statutory Formula rates to the new rates (discussed in the next section below) as per the following table:
|
Commitment event |
Application of ‘new’ rates |
| Lease is refinanced | Post-budget rates will apply from 1 April following refinance date. |
| Employee changes employment | Post-budget rates will apply from employment change date. |
Most drivers holding a pre-Budget car are happy with the old FBT rates, but it is worth noting to those who see an advantage in the new rates that deliberately bringing about a Commitment Event could be seen as tax avoidance by the ATO.
Vehicles leased after the 2011/12 Budget
Novated leases that commenced after 10 May 2011 (or have had a post-Budget commitment event) are valued for FBT purposes using the ‘new’ Statutory Formula rates:
|
Kilometres Travelled |
FBT Year Ending |
|||
|
31/3/2012 |
31/3/2013 |
31/3/2014 |
31/3/2015 |
|
|
0 – 24,999km |
20% |
20% |
20% |
20% |
|
25,000 – 39,999km |
14% |
17% |
20% |
20% |
|
40,000km + |
10% |
13% |
17% |
20% |
While the new rates have seen high-km drivers lose a portion of their tax benefit, they’ve also delivered a big win to ordinary drivers who can now lock in great tax savings regardless of kilometres travelled. Packaging employees are no longer penalised if annual kms fall below 15,000!
As predicted, this change has seen a big jump in vehicle packaging amongst ordinary Australian drivers: our leasing team has seen a 150% increase in the number of drivers with low annual kms taking up a novated lease!
To better understand this change we modeled the tax savings across different kilometre bands at two salary levels: $45,000 and $95,000. Our modeling showed the following annual saving results for the 2012 year:
|
Annual Tax Savings at $45,000 Salary |
|||
|
Annual Kilometres Travelled |
Pre-Budget |
Post-Budget |
% Change |
| 14,500 km |
$2,740 |
$3,356 |
22% |
| 21,000 km |
$3,583 |
$3,583 |
0% |
| 30,000 km |
$4,548 |
$4,331 |
-5% |
|
Annual Tax Savings at $95,000 Salary |
|||
|
Annual Kilometres Travelled |
Pre-Budget |
Post-Budget |
% Change |
| 14,500 km |
$3,248 |
$4,050 |
25% |
| 21,000 km |
$4,470 |
$4,470 |
0% |
| 30,000 km |
$6,254 |
$5,853 |
-6% |
To summarise, under the new rules we have seen:
- a 20-30% increase in the savings available to low-km drivers;
- no change in the savings available to mid-km drivers; and
- a 5-10% decrease in the tax savings currently* available to high-km drivers.
*Note that our modeling is for current-year packaging only. Savings for high km drivers will decrease further over the next three years to be more in line with those available to mid-low km drivers.
So, overall there have been a lot more winners than losers from the Budget changes, with low-km drivers seeing a big increase in their tax savings while high-km drivers are seeing only a modest reduction in theirs.
And the most important result: thousands of dollars in tax savings remain available to everyone!
Remember – if you want to see what sort of savings you could achieve through a novated lease then visit our Smartleasing website and have a play around with the Novated lease Calculator.
Potential changes to the LAFHA benefit
Published January 3, 2012 Customer Updates , Legislative Changes , Living Away From Home Allowance 2 CommentsHello all – it’s Simon here, Senior Tax Advisor at Smartsalary…
The Federal Government has released its proposed changes to Living Away from Home Allowance benefits.
Should these be endorsed, the two points that will most notably impact salary packaging can be summarised as follows:
1. Eligibility: eligibility for the living-away-from-home (LAFH) status is going to be severely limited for temporary resident employees (i.e., those on 457 visas) – in fact, most will no longer be able to claim LAFH status.
2. Substantiation: All LAFH benefits will now need to be substantiated, although food reimbursements won’t be, as long as they are paid at “reasonable” levels.
These changes will not apply until 1 July 2012; however we expect that the number of customers who will qualify to salary package LAFH benefits will drop significantly.
So if you’re a visiting foreign worker, or a business employing visiting foreign workers, you might want to start thinking about some of the other salary packaging opportunities available to employees who move from one location to another.
For example, relocation exemptions can offer significant opportunities for savings around direct relocation costs PLUS some temporary accommodation benefits for eligible employees. Equally, if you’re relocated to a remote area there are very generous concessions available for household rent and utilities.
Smartsalary currently offers these benefits to any business that elects to add them to the menu of benefits, so if you’re interested and these benefits are not already available then you should ask your employer to add them today!
‘Tis the season to save!
Published December 19, 2011 Customer Updates , meal entertainment , Packaging Tips Leave a CommentSalary packaging can help you save through the holidays. Here are some tips on how:
Go shopping with your Living Expenses Card!
Remember, if you’re salary packaging your tax-free cap, you have until 31 March to spend your funds in order to maximise your savings. Use your card over the holiday period to shop for groceries or even Christmas presents!
Use your Meal Entertainment Card at Christmas
Christmas is traditionally a time of excess, with plenty of good food on the table! So if you’re packaging meal entertainment, it’s a great opportunity to save!
If you’re headed out with family, friends or colleagues for a meal over the holiday period, you can use your Meal Entertainment Card. Depending on who you work for, a catered Christmas lunch could also be packaged (check your employer’s policy on our website).
But remember – take away meals don’t qualify as meal entertainment, so you have to be eating at a restaurant with a dine-in facility to meet the criteria defined by the ATO. One more thing – you or your spouse have to incur the cost of the meal, otherwise you can’t claim the cost as meal entertainment.
Drive your Novated Lease over the holidays
If you’re headed away for Christmas or for a summer holiday, we know many of you will probably drive your packaged car. It’s a great way to save tax on your fuel and servicing costs – and of course, we encourage you to please take care on the roads!
If you have any questions about salary packaging over the holidays, feel free to leave them in the comments section and we’ll do our best to answer.
I’d like to wish you all a very happy holiday season and prosperous New Year! Thanks so much for your incredible loyalty . . . we really do hope to be as good to you as you’ve been to us!
