Federal Budget 2015

Simon Ellis, our Senior Tax Adviser, is taking over the blog as he does after each budget to give you a rundown of the changes relevant to salary packaging:

The Abbott Coalition Government handed down its second Federal Budget last night.

For our Federal, State and Local Government clients, as well as our Corporate, University Sector clients, and all other clients that do not have access to the Public Health and Not-For-Profit (NFP) salary sacrifice concessions, it contains no changes that will affect your arrangements with Smartsalary.

For our Public Health and NFP clients that have access to salary sacrifice concessions, the Budget contains one change of which you should be aware. Effective from 1 April 2016, the Meal Entertainment and Holiday Accommodation/Venue Hire benefits will go from each being uncapped, to being subject to a combined annual cap of $2,550.

Note:      the Budget papers – and much of the media – are referring to a ‘grossed-up’ cap of $5,000.  This must be translated into an actual dollar cap by ‘grossing down’ the benefit by the type 2 gross-up rate of 1.9608: i.e. $5,000 / 1.9608 = $2,550.

We appreciate that this cap will represent a reduction in the salary packaging benefits claimed by the typical Public Health and NFP employee who take up these benefits.

In addition to capping, the budget changes also mean that Meal and Accommodation benefits will now be reportable, which could potentially affect employees who pay medicare levy surcharge, child support and HECS/HELP obligations, or who claim income tested government benefits (see here for full details).

Smartsalary will be updating our salary packaging processes to ensure that a transition to the cap from 1 April 2016 is as seamless as possible, and that our customers will be able to continue packaging easily and efficiently in the new environment.  Further details will be provided to all customers in this regard closer to that date.

We also note that last night’s budget contained one other change relevant to FBT: a slight relaxation of the exemption requirements for portable electronic devices such as laptops and tablets. However this change applies only to small business employers and it’s not yet clear whether it would even apply to salary packaging arrangements.  At this point we do not expect that this change will affect the salary packaging activities of Smartsalary customers.


Deven Billimoria
Chief Executive Officer
Smartgroup

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