May 19 2014
Avoid the Deficit Levy – Salary Packaging & Novated Lease Reality Check
There has been considerable Media attention over the past week reporting of a “Loophole to avoid the Deficit Levy” which involves Salary Packaging.
Remunerator would like to place a reality check into this report.
In summary, in theory “yes” but in reality “highly unlikely”.
First of all, as reported, you have to be on the top tax rate, however what is not clearly reported is that you can ONLY salary package the amounts above $180,000 for it to work.
Then you have to salary package a substantial amount to make it worthwhile.
For example: If you package $150,000 to the credit card (probably be the easiest way to avail yourself of the benefit), the total amount packaged including FBT will be about $280,000. You could include a Novated Lease, but that is available at all Salary Levels and not a “window of opportunity” to avoid the Deficit Levy.
So you would have to be earning about $500,000, after allowing for Super Contributions, to ensure that you don’t salary package yourself below the tax threshold of $180,000. Otherwise you will be paying too much tax.
Therefore you will “avoid” about $1,600 after tax.
Here’s the catch: you would have paid about $3,000 in credit card charges to get the benefit! Perhaps more if you use an AMEX!
There are easier ways to earn Frequent Flyer Points!!