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!

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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!

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Our customers often ask about how salary packaging impacts outstanding HECS/HELP debts. Let’s take a closer look.

Please bear in mind that the following analysis only relates to employees of Public Hospitals and not-for-profits who are able to access the threshold/cap benefit.

So what do you need to know?

Well, the fundamental message is as simple as this: salary packaging the threshold/cap benefit will save you money overall but will also increase your HECS repayments. This is best explained by example: the impact of packaging the $9,095 threshold by Public Hospital employees who have an outstanding HECS debt is summarised in the table below:

The above table shows two important things:

1. that take-home pay increases as a result of threshold packaging activities at most salary levels even after the increased HECS payments are factored in, and
2. that even where the HECS repayments ‘use up’ most of the salary packaging savings the packaging still means that HECS debts are being paid off faster using funds that otherwise would have gone to the taxman.

It’s win-win. Money that otherwise would have gone to the ATO as tax is instead used to pay down your HECS debt, and even after this there are still extra tax savings left over for most employees.

However it’s not all smooth sailing because the additional HECS amount is generally not collected from your salary during the year but is billed by the ATO as a lump-sum at tax year-end. This can put a serious dent in your bank balance unless you have prepared for it by setting money aside during the year.

If this sounds like something you can handle then get in touch with Smartsalary ASAP because tax savings wait for no one. Also, please keep in mind that the above information is general advice only.

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Last week we attended the Customer Service Institute of Australia (CSIA) Service Excellence Awards, which recognises outstanding achievement in customer service. We were thrilled to win the NSW State Award for best Medium Business. In addition, we were highly commended (2^nd place) for the National Award.

You see, we were first accredited by the CSIA in 2008, and have since worked hard to continually improve our service to customers . . . culminating in our first customer service award this year. While it’s nice to win an award, we realise that what really matters to you, our customers, is tangible enhancements in our service delivery.

We hope you’ve seen some benefits over the years, but do appreciate that there are many things we can do better. As always, we welcome your feedback and any suggestions for improvement.

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• Sign up for salary packaging?
• Learn more about how much you’ll save?
• Learn more about novated leases or other items you can package?
• Get help with the sign-up process?

Fantastic!

We have 23 consultants in 15 locations throughout the country ready to teach you about salary packaging and help you get started.

Here are the services we offer:

Onsite group presentations
Get general information about salary packaging.

Interactive workshops
Specific information to see how much you could save.

One-on-one consultations
Personal consultation to discuss your estimated savings and get assistance signing up.

Take a look at where our consultants are based on the below map!

If you’re in one of these locations and want to make an appointment now, simply:

1. Register online at www.smartsalary.com.au
2. Once you’ve registered, make an appointment via our online appointment booking system or call us on 1300 476 278 and one of our friendly Customer Service Consultants will book one for you.

We want to make sure we’re based in the right places. If we’re not close by, we’ll organise a road show to make sure we’re reaching you and your colleagues.

To help us understand where we need to be, please take this quick poll:

Please feel free to comment and let us know where else you’d like our consultants to visit!

January 2012 update: For the latest information about the 2011/12 novated lease budget changes, please click here.

Simon Ellis here, blogging again on Deven’s request in relation to the recent changes to the rules around how car benefits are valued for salary packaging purposes.

Deven has asked me to update our readers as the draft legislation for the new car fringe benefit rules has now been released by Treasury as Taxation Laws Amendment (2011 Measures No. 5) Bill 2011. This release clarifies a number of the outstanding issues lingering from the budget announcements, although there are still some areas of confusion and it’s always worth noting that the final legislation has not yet been passed by Parliament.

Nonetheless there’s good information in this latest release that our readers and customers should find helpful. But before I get into detail I thought I’d first provide a brief recap of the 2011 Budget changes:

• car fringe benefits will no longer be ‘valued’ for tax purposes using a sliding scale of rates based on kilometres travelled: all cars will be valued at a flat 20% rate
• The new rules will not apply to employees whose packaged vehicle was set up prior to the budget announcement on 10 May 2011, and
• Transitional rates will apply to employees who commence packaging after the budget announcement and who travel in excess of 25,000km per year

What we now know

The draft legislation and the explanatory memorandum that accompanies it have clarified the following:

• The trigger point for application of the new rules is likely to be the time of novation, i.e. the date the vehicle novation agreement becomes binding on all parties. For example, a car packaged under a novation agreement signed before 7:30pm on Tuesday 10 May 2011 will be packaged under the old rules, whereas cars novated after that time must be packaged under the new/transitional rules;
• Anyone currently packaging a car under the old rules will continue to use those rules until their novation contract with their current employer ends. This means that changing employers or going on extended leave will generally trigger application of the new rules (as these events involve the cessation of a novation agreement);
• Employees currently salary packaging a car at the 26% rate will not be able to access the new 20% rate until the end of their novation agreement. Artificial attempts to end a novation early solely in order to access the new 20% rate are likely to be pursued by the ATO as tax avoidance; and
• If a ‘trigger’ occurs during an FBT year such that a car moves from the old to the new rules (but stays under the same employer) the old rules will continue to apply for the remainder of that FBT year and the new rules will only apply from 1 April in the subsequent year.

There are still a few unresolved issues, such as confirmation from the ATO on when it considers a novation agreement ‘binding’, nonetheless the release of the draft legislation has allowed Smartsalary to start redesigning our packaging systems, rules and processes to accommodate the new rules.

If you’ve got any burning questions, feel free to ask them in the comments section and we’ll do our best to answer. Otherwise call us on 1300 476 278 and talk with one of our friendly leasing experts.

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January 2012 update: For the latest information about the 2011/12 novated lease budget changes, please click here.

Earlier today we filmed an interview with Simon Ellis, our Senior Tax Advisor. In this video, he outlines his thoughts on the recently announced changes in the 2011 Federal Budget and how they will impact salary packaging. A written summary can also be found here.

January 2012 update: For the latest information about the 2011/12 novated lease budget changes, please click here.

The 2011-12 Federal Budget has been handed down and there are important changes in play for vehicle packaging. Simon Ellis, our Senior Tax Advisor, gives us a run-down of these changes and how they are likely to impact those of you salary packaging a novated car lease or thinking about packaging one.

Following a significant amount of media coverage last week we were expecting changes to the way new leases are taxed for Fringe Benefit Tax (FBT) purposes. And in fact, that’s what we got.

From tonight all new novated leases will be subject to a new FBT valuation regime that will, after four years, result in all salary packaged cars being valued for tax purposes at 20% of their initial cost regardless of the kilometres they travel. These changes are consistent with the Henry Tax Review recommendations presented in May last year. For more information have a look at Smartsalary’s coverage of last year’s Henry Tax Review.

The budget papers are a bit light on detail, but the Treasurer’s home page does provide detailed information on the implementation of the new rules.

The key points from the perspective of employers and employees are as follows:

• The new rules do not apply to existing novated leases. All current packaging arrangements remain unchanged.

• New leases will, from today, use a transitional set of statutory rates that will gradually phase out the 7% and 11% valuation options over the next four years (see the table in the Treasury link above). This means that the savings achievable for employees driving more than 25,000 kilometres per annum will be lower and that, at least for the time being, some employees will still need to meet kilometre targets in order to get the most out of their packaging arrangements.

• The new rules will now open up novated car leasing to employees currently not packaging a vehicle and driving less than 15,000km per year. Previously employees driving less than 15,000 kms were required to value their cars for tax purposes using the 26% rate, but now the 20% rate is immediately available. Since the average Australian car travels less than 15,000km per annum it’s likely that a significant number of employees who previously couldn’t achieve good savings will now benefit from a salary packaged car.

A number of questions remain unanswered- for example, “will those currently packaging a car on a 26% rate be locked in to that rate for the term of their lease or will they be able to elect to apply the new transitional rates? and “how will these rules apply to employees who are currently mid-settlement on a novated lease?” At the moment Smartsalary is investigating these and other issues. We’ll let you know more as we find out.

We’ll be issuing more detailed instructions to our customers over the coming days, and will be posting a video presentation here shortly explaining our views in more depth. Stay tuned.

Well that’s a lot to consider and I’m sure there will be plenty more to come. In the meantime feel free to provide your thoughts on this change in the comments section.

We’ve released an exciting new feature on our website;  you can now submit and upload substantiation for your claims online!

You see, at Smartsalary, we process 200,000 claims per year.  Since we often get huge stacks of receipts stapled together, it can be a messy process.

So now you are able to claim your expenses electronically right on our website!  Currently, this feature is available for the most popular claim types:

1. Novated Lease running expenses

2. General living expenses; available to those of you who work in the not-for-profit or public health sectors

3. Meal Entertainment expenses, which may be applicable if you work in the not-for-profit or public health sectors

Simply log into your account and you’ll find the tool ready for use. We’ve already received well over 1,000 claims online, and the initial feedback has been very positive.

The advantages of the online claiming process are:

1. We’ll receive your claim faster.

2. You can track the status of your claims online.

3. Your claim will be express-processed (especially if you upload the substantiation electronically) – they are currently being processed within one day.

It’s a leading edge capability within the salary sacrifice industry, so don’t delay . . . log-in now and submit your claims online today!

You’ve been great in providing us with some fantastic feedback that’s helped us tailor our messages and their frequency in a more effective way.
Heres some of what you’ve had to say:

“It would be brilliant if it included the kilometres I need to achieve (i.e. the end odometer reading I need to be at). That would give me an idea of how far behind I am so I can plan to increase.”
R. Bradley
C. Monaghan

“I feel the aggressive wording of this email should be left closer towards the end of the year.”

“I found the wording confusing and it should have told me what I needed to do.”
E.Turner

As you can see, just one comment can have an impact on thousands of email communications to our customers.
In addition to providing this open text, we also have a rating system in place.

Last month we were thrilled to see our average rating for communications reached 4.3 out of 5 stars – our highest yet. This is a great result, but clearly we have room to improve!
You can see that YOUR feedback makes a real difference – we do listen, and it is the source of change.