Salary Packaging Guidelines for Employees of Australian Catholic University

Transcription

1 SALARY PACKAGING SERVICES AUSTRALIA PTY LTD A.B.N /179 Queens Street, Melbourne Vic 3000 Locked Bag 4000 Vic 3001 Telephone: Facsimile: Salary Packaging Guidelines for Employees of Australian Catholic University Revised Version 04 January 2005

2 TABLE OF CONTENTS - GUIDELINE TAKE ADVANTAGE OF SALARY PACKAGING AND SAVE... 1 HOW SALARY PACKAGING WORKS... 2 HOW SPS ADMINISTERS YOUR SALARY PACKAGE... 3 ITEMS THAT CAN BE PACKAGED THROUGH SPS... 3 THE MAXIMUM AMOUNT YOU CAN PACKAGE... 5 AUSTRALIAN CATHOLIC UNIVERSITY POLICY DOCUMENT... 5 INDEPENDENT REMUNERATION CONSULTANCY... 6 WHAT CONDITIONS APPLY TO SALARY PACKAGING BENEFITS OFFERED BY THE UNIVERSITY... 6 HOW SALARY PACKAGING WORKS AT AUSTRALIAN CATHOLIC UNIVERSITY... 7 ADMINISTRATION... 7 ARRANGE A MEETING WITH A REMUNERATION CONSULTANT... 7 HOW TO PREPARE FOR AN APPOINTMENT WITH A REMUNERATION CONSULTANT... 7 FINANCIAL ADVICE... 8 SALARY PACKAGE AUTHORISATION AND SALARY PACKAGE CONFIRMATION... 8 FEES... 9 GUIDES TO ITEMS YOU CAN PACKAGE SPS PARTNERS MAXIMISE YOUR BENEFITS AND SAVE EASIFLEET MOTOR VEHICLE PURCHASE AND FINANCE EASI-HOME LOANS BARGAIN NOTEBOOKS...14 QUICK REFERENCE NOTES ON HOW SALARY PACKAGING WORKS LEASE ARRANGEMENTS EXPLAINED FRINGE BENEFITS TAX...17 INPUT TAX CREDITS AND THE GST PAYMENTS SUBSTANTIATION DOCUMENTS REQUIRED FOR SALARY PACKAGING CHANGING OR TERMINATING YOUR PACKAGE EXPENSE CLAIM FORMS... 20

3 APPENDIX A INTERNAL SALARY PACKAGING EMPLOYEE CHECKLIST APPENDIX B SAMPLE LETTEROF ELIGIBILITY TO PARTICIPATE APPENDIX C SALARY PACKAGING EMPLOYER CHECKLIST APPENDIX D - SPS REMUNERATION CONSULTANTS APPENDIX E CLIENT DETAILS FORM APPENDIX F ITEMS TO BE PACKAGED FORM APPENDIX G MOTOR VEHICLE PACKAGE FORM APPENDIX H EXPENSE CLAIM FORM... 29

4 TAKE ADVANTAGE OF SALARY PACKAGING AND SAVE As an employee of Australian Catholic University you are able to take advantage of opportunities to maximise your salary by saving tax through salary packaging. It simply involves using your pre-tax income wherever possible to pay for your day to day expenses thereby reducing your income tax which increases your disposable income. Salary Packaging Services (SPS) administers salary packaging for Australian Catholic University. Through SPS you can increase your take home pay by reducing your income tax as well as by taking advantage of SPS preferred supplier partnership agreements with three premier companies; Easifleet Management who provide vehicle purchasing, financing (including novated lease) and maintenance services; EasiHome Loans who provide a nocharge home and investment loan advisory service; and Bargain Notebooks who provide a range of laptops and PDA s at very competitive prices. For more information on our partners click here. SPS is a national company specialising in the facilitation and administration of employee benefits. Each employee has unique circumstances and different expenses, we work with you on an individual basis to construct a package that best meets your requirements. If you proceed with packaging, SPS calculates the amount your employer needs to deduct from your salary pre-tax and we then disburse payments as appropriate. For example, if you package a motor vehicle SPS makes the payments to the leasing company on your behalf. SPS has a range of Remuneration Consultants to help you assess how you can maximise your salary through packaging. Through these consultants, SPS aims to be at your location of employment as often as possible so that you can get to understand in a one-on-one discussion how salary packaging works and how you can benefit. You can even bring your spouse or partner to the consultation. It costs you nothing if you do not proceed even if the consultant identifies that you could benefit. For more information click here. The Commonwealth Government has made this opportunity available with the intention that employees take advantage of the approved benefits. It is not a product of a loophole in the legislation. Everybody's personal financial circumstances and incomes are different. And whether you make $30,000 or $130,000, with an SPS salary package you have the opportunity to make better use of your money by taking personal control over your salary and how it is used. Page 1 Version 04 - January 2005

5 How Salary Packaging Works The concept is quite simple but many employers and employees are not sure of the value it offers them. Instead of receiving your whole remuneration package as Gross Taxable Income on which income tax is payable you take part of your remuneration in some other form, for example, the payment of regular expenses such as rent, mortgage or credit card payments. There is no PAYG (income tax) tax payable on these items however Fringe Benefits Tax (FBT) is payable on some benefits. The good news is that because Australian Catholic University is classified as a Rebatable employer you are eligible for a rebate of 48% of the amount of FBT that would otherwise be payable up to a limit of $30,000. This limit is known as the grossed up amount. Your Remuneration Consultant can help you to further understand this concept. The following serves as a simple example of how you can save by packaging the purchase of a laptop computer: Assume you earn $ per annum Assumed cost of computer = $3,300 including $300 GST. Tax Saving = $1,040 Plus you will be entitled to receive the GST of $150 via the input tax credits available to the employer (provided you submit the tax invoice to SPS). Your total tax saving is therefore $1,235 The above savings are calculated as in the indicative example which follows: Remuneration package of $45,000 You purchase a portable computer for $3,300. Your employer is able to claim the input tax credits and an amount in line with ACU policy is passed on to the employee. Salary only Purchase of portable computer now packaged Salary package $45,000 $45,000 Portable computer purchase $0 $3,300 Plus ITC $150 Fringe Benefits Tax n/a $0 Pre-tax Salary $45,000 $41,850 Tax (including Medicare levy) $10,400 $9,315 Portable computer purchase $3,300 $0 Net Cash $31,300 $32,535 Packaging Benefit $1,235 Page 2 Version 04 - January 2005

6 How SPS Administers your Salary Package SPS offers a service which allows you to maximise your financial benefit through salary packaging. SPS establish and collect all the supporting paperwork and liaise with your employer to initiate your salary package. SPS is an administration service provider that ensures your benefits are paid on time every time and that the taxation compliance obligations of you and your employer are properly accounted for. SPS also maintains the compliance records (known as substantiation documents) and provides the FBT and reportable fringe benefits details to Australian Catholic University in addition to the payment of the package items. SPS Remuneration Consultants will show you how you can maximise your salary packaging opportunity. SPS administration staff are not qualified to provide this information. Items that can be packaged through SPS Benefits can be separated into four distinct categories; Concessionally Taxed Benefits, FBT Exempt, Otherwise Deductible Benefits and Fully Taxed Benefits. Items, selected by your employer, which can be packaged through SPS include: Concessionally Taxed Items Novated leased motor vehicles FBT Exempt Items Vehicles attract concessional FBT. The actual amount is dependant on the cost of the vehicle and the annual kilometres travelled by you. For more information on vehicles refer to the document Motor Vehicles - guideline, procedure and factsheet. Superannuation Additional Superannuation payments can be made to existing Superannuation Funds via ACU where applicable. However if you wish to package to another fund, it can be salary packaged via SPS. Please note that current pre-tax superannuation arrangements made through ACU will continue and are not required to move to SPS. For more information on Superannuation refer to the document Superannuation guideline, procedure and factsheet. Page 3 Version 04 - January 2005

7 Notebook Computers and Personal Digital Assistants (PDA s). For more information on Notebooks and PDA s refer to the document Portable computers guideline, procedure and factsheet Otherwise Deductible Items Remuneration Consultancy Fees Salary Packaging Administration Fees Packaging of deductible items will allow input tax credits to be claimed on the GST. The employer claims these credits and an amount in line with ACU policy is passed on to the employee. Each employee can package remuneration consultancy fees. For more information refer to the document Otherwise deductible guideline, procedure and factsheet Fully Taxed Benefits These benefits are fully assessable for FBT but because of the rebatable status of Australian Catholic University they can be packaged from your pre-tax salary up to the $30,000 gross up threshold. This should be read in conjunction with the University policies on Salary Packaging and Superannuation. Policies can be found on Australian Catholic University website at It is recommended you obtain information from your trained SPS remuneration consultant to determine whether you might benefit from packaging these items. Items in this category include: Mortgage Repayments Rent Reimbursement Credit Card Reimbursement Fully Taxed Benefits Refer to the document Full FBT Items guideline Page 4 Version 04 - January 2005

8 The Maximum Amount You Can Package When selecting the benefits you are interested in packaging you should be aware that Australian Catholic University allows you to package up to a maximum of 50% of your salary. In this regard you need to take into account any current in-house salary packaging arrangements such as compulsory or voluntary contributions being made as pre tax superannuation contributions, or, pre-tax parking payments. Fringe benefits packaged up to the $30,000 gross up threshold are entitled to receive the FBT rebate of 48% and all benefits that exceed the threshold will be subject to the relevant FBT. NOTE: EMPLOYER PROVIDED MOTOR VEHICLES Any employees who receive any other employer provided benefits that are subject to FBT will need to ensure that remuneration consultants make allowance for the reportable fringe benefits when constructing a person s package. These benefits may include accessories, motor vehicle, entertainment or accommodation expenses. While all associated costs are managed by the employer, it is necessary to include the reportable FBT in order to comply with the maximum package parameters of $30,000 grossed up value. Above this amount the relevant FBT would apply. AUSTRALIAN CATHOLIC UNIVERSITY POLICY DOCUMENT The University through the Enterprise Bargaining process recognised that packaging of salaries will provide staff with opportunites for individual financial benefit. Two University policies on salary packaging have been developed to support the Enterprise Agreement. The two policies are: 1. Flexible Remuneration: Salary Packaging Policy and Procedure 2. Motor Vehicle and Novated Lease Policy. Further University Policies that impact on Salary Packaging are the Pre-Tax Superannuation Arrangements, Parking at MacKillop Campus, and Parking at St Patrick's Campus Pre-Tax payroll deduction Arrangements. This manual should be read in conjunction with the University policies on Salary Packaging and Superannuation. Policies can be found on Australian Catholic University website at When selecting the benefits you are interested in packaging you should be aware of any Australian Catholic University policies that may limit the amount of salary you can package. The amount you package is subject to the provisions of your employment contract and University s policy regarding salary packaging. Please read the University s policy. Page 5 Version 04 - January 2005

9 Independent Remuneration Consultancy Through SPS, every employee can find out whether they will benefit from salary packaging, at no cost if they do not proceed. This offering is unique to SPS and means that you can have your own individual circumstances assessed, without the expense and hassle of paying if the benefits are marginal or worse. SPS Remuneration Consultants keep it simple and will not charge if you do not proceed with the package, even if they have demonstrated that you would save. Remuneration consultancy fees are tax deductible to the employee and can be built into the package or claimed as a deduction in end of financial year tax returns. The SPS specialist Remuneration Consultants are listed at the back of this guideline. Because taxation and superannuation legislation is complex and affects each person according to their personal circumstances, Australian Catholic University strongly recommends all employees wishing to salary package obtain appropriate information before making any decisions. SPS remuneration consultants are trained to give this information. Australian Catholic University accepts no responsibility for information given to employees by Remuneration Consultants or for the consequences of decisions made by employees who seek advice or a consultancy. The minimum level of salary packaging advice that the University accept is Remuneration Information received from an SPS trained Remuneration Consultant or an independent financial advisor. Please refer to the list of SPS Remuneration Consultants. What Conditions apply to Salary Packaging benefits offered by the University Staff may salary package up to 50% of their gross salary, inclusive of any current pre-tax compulsory or voluntary contributions. The full range of salary packaging benefits are available to all continuing and fixed term, full-time and part-time staff employed for a contract period of more than 12 months. A limited range of salary packaging benefits, such as superannuation (UniSuper only) and on campus car parking is available to fixed term staff employed for a contract period of less than 12 months. Salary packaging benefits are not available to casual staff or staff where funding for the position is provided external to the University. Page 6 Version 04 - January 2005

10 Staff are reminded that participation in salary packaging is purely voluntary and are able to request those benefits that the University has made available that best suit their personal and financial circumstances. Any direct costs associated with salary packaging arrangements will be met by the staff member, including any increase in taxation payable by the University. As a result of salary packaging, the University can pass on to the staff member some of the input tax credits. As the costs associated with Salary Packaging will be met by the staff member and the program is to be cost neutral to the University, the University will pass on 50% of the input tax credits, where applicable, to the staff member. Expenses associated with the business use of a motor vehicle provided as a package benefit cannot be claimed as a taxation deduction by the employee as this is factored into the FBT calculation. How Salary Packaging works at Australian Catholic University Administration The University has engaged the services of Salary Packaging Services Australia Pty Ltd (SPS) to administer the salary packaging program and co-ordinate the provision of information through Remuneration Consultants to staff through seminars and one-on-one contact. SPS is an administration service that principally provides bill paying, payroll and salary packaging reporting for employers who wish to provide their employees with innovative and flexible remuneration. SPS make the necessary payments of the package items, maintain the substantiation records and provide the FBT and reportable fringe benefits details to the University. Arrange a meeting with a Remuneration Consultant Remuneration Consultants are available to meet with staff at an agreed time and location, normally on campus. Appointments with a Remuneration Consultant will need to be made through initially contacting SPS. How to prepare for an appointment with a Remuneration Consultant Look over the salary packaging policy and guidelines and decide which benefit items you may want to package. If you wish to package or purchase a notebook computer you may want to obtain competitive prices to determine a realistic price. If you wish to package a motor vehicle, look over the Motor Vehicle and Novated Lease Policy, and decide what sort of car you may want and obtain some competitive quotes, including cost of car and finance from Easifleet Management. Page 7 Version 04 - January 2005

11 If you wish to package mortgage or rent, the amount of regular payment will need to be provided. If you wish to package credit card payments, the amount of regular payment (averaged over a salary packaging year) will need to be provided. Obtain information on competitive finance for motor vehicles or mortgages for comparison, including finance options from Easifleet Management. An estimate of how much cash you must have in your take home pay. To assist staff plan for the initial appointment with a Remuneration Consultant a Salary Packaging Employee Checklist has been prepared and can be found at Appendix A. Prior to your appointment with a Remuneration Consultant obtain an eligibility letter to participate in salary packaging from Personnel Relations and Equal Opportunity, a sample can be found at Appendix B. Financial Advice Remuneration Consultants at SPS are specialists in salary packaging and remuneration planning. A listing of these consultants can be found in Appendix D. Once you have received an indicative salary packaging proposal / quote from the Remuneration Consultant, you will need to consider the proposal / quote, prior to accepting and proceeding with the Salary Packaging Contract. Alternatively, you may choose to receive financial advice from a personal financial adviser. Staff are reminded that not all financial advisers or accountants are expert in the field of salary packaging. You will need to provide verification of financial planning advice to the University. This will be a statement indicating that you have received financial planning advice signed by your accountant, financial advisor or SPS trained Remuneration Consultant. SPS have financial advisers who are specialist in salary packaging and remuneration planning. A listing of these advisers can be found in Appendix D. Staff members may find that the SPS trained advisor is also the Remuneration Consultant. Salary Package Authorisation and Salary Package Confirmation Once you have made a decision to proceed with Salary Packaging in line with the proposal / quote received from a Remuneration Consultant and have obtained financial advice you will need to authorise the Salary Package. This will require the completion of the appropriate SPS forms, Client Details Form, Items to be Packaged Form, and Motor Vehicle Package Worksheet, found at Appendix E, F, and G, with either your financial adviser or Remuneration Consultant from SPS. Page 8 Version 04 - January 2005

12 If you will be meeting with an SPS Remuneration Consultant you will need to bring: Bank account details where reimbursements are to be made (should be on the form). Substantiation documents. Statement of Assets and Liabilities if you wish to finance a vehicle or mortgage. (including income and expenditure details of family). Cheque Book (Remuneration advice fee is payable at the time of the consultation. The fee may be reimbursed through the client s package). Once you complete a Package Authorisation, your Remuneration Consultant will send those details to SPS. SPS will then send a confirmation of your salary packaging arrangements to the University who will check the details using the Salary Packaging employer Checklist, found at Appendix C, and confirm with SPS that the Salary Package satisfies or does not satisfy the Australian Catholic University policy requirements. When confirmation is provided from the University to SPS, the University will make the appropriate adjustments to your salary. Fees The Administration Fee for SPS services are $ per annum inclusive of GST and are normally collected as fortnightly installments of $9.65. Where Superannuation (other than UniSuper) only is packaged via SPS the fee is $ per annum inclusive of GST and is normally collected as fortnightly installments of $3.85. The fees can be included as a benefit item in the package under Salary Package Administration Fees. You will be charged a fee for financial advice on salary packaging from your accountant or financial advisor. If you use SPS, the SPS Remuneration Consultant fee is $330 inclusive of GST. The fee can be included as a benefit item in the package under Financial Counselling Fees. If you choose to use your own financial advisor and if SPS need to rework the forms received from you or your financial adviser an additional fee of $50 may be required. Page 9 Version 04 - January 2005

13 GUIDES TO ITEMS YOU CAN PACKAGE In this section you can gain an understanding of the aspects you could consider when salary packaging in order to achieve the best benefits. Your remuneration consultant will evaluate the benefits for you so you don t have to work it out for yourself. These guides are simply included to help you understand how you can benefit and some of the considerations your consultant will take into account before showing you how you can maximise your salary. Guides for items that can be packaged through SPS are available as separate documents on Australian Catholic University website at The following guides are available: Packaging a Vehicle - Refer to the document Motor Vehicles - guideline, procedure and factsheet. Notebook computers and Personal Digital Assistants (PDA s) - Refer to the document Portable computers guideline, procedure and factsheet Otherwise deductible items - Refer to the document Otherwise deductible guideline, procedure and factsheet Superannuation - Refer to the document Superannuation guideline, procedure and factsheet. Items fully assessable for FBT - Refer to the document Full FBT Items guideline Disclosures and Disclaimers SPS may receive referral fees from some of our partners. SPS Remuneration Consultants provide demonstrations of benefits and salary packaging to employees of Australian Catholic University. SPS employees are not qualified or able to provide taxation or financial advice and no information, either verbal or printed, received from SPS employees constitutes taxation or financial advice. This Guide is based on taxation and other laws that are current as at 1 July It contains general information only which is based on the continuance of present laws and rulings and their interpretation. The information in this Guide is not intended as professional advice. The provisions of this Guide, the Guidelines and the Fact Sheets and the benefits of packaging your salary using SPS are subject to the provisions of your employment contract and the university s policy regarding remuneration packaging. Page 10 Version 04 - January 2005

14 SPS PARTNERS MAXIMISE YOUR BENEFITS AND SAVE Easifleet Motor Vehicle Purchase and Finance SPS in partnership with Easifleet Management are able to provide you with a service that may save you thousands of dollars off the price and finance of a new car. Easifleet Management is one of Australia s largest independent Fleet Management companies. Easifleet s fleet buying power means they can help you achieve substantial discounts on all makes and models of vehicles as well as provide low cost finance through their novated lease products. With novated lease being the obvious method of obtaining a vehicle under salary packaging, Easifleet have developed Easilease Novated Lease to make the whole process as simple as possible. Easilease combines extremely competitively priced finance with Easifleet s vehicle purchasing power to ensure employees get the best return for their money. Easifleet will provide information on vehicle selection, lease terms, residual values and FBT on the phone or meet with you to discuss your options. What benefits will this provide to you and your family? Discount rates on all makes and models of vehicles, vehicle finance and accessories whether the vehicle is to be packaged or not. Easifleet s fleet buying power means significant savings for you Vehicle acquisition service new, demonstrator and used vehicles can be sourced on your behalf Convenience allow Easifleet to source your new car, arrange the finance, fit your accessories and organise all the paperwork saving you time, money and stress Vehicle disposal service for your existing car saving you time and costly advertising Refinance existing vehicle finance at more attractive rates Salary packaging for new, used, demonstrator or even your existing car to save you tax and increase your take home pay You can access this service even if you don t choose to salary package Page 11 Version 04 - January 2005

15 Easifleet Motor Vehicle Purchase and Finance cont Easifleet Management 484 Albany Highway Victoria Park WA 6100 Contacts: Phil Harvey or David Maddocks Tel: (08) Fax: (08) Easifleet Management Level 16, 10 Queens Rd Melbourne Vic 3004 Contacts: Zac Brennan and Scott Iriks Tel: (03) Fax: (03) Easifleet Management 921 Kingsford Smith Drive Eagle Farm Brisbane QLD 4009 Contacts: Scott Ferdinands and Anthony Bryant Tel: (07) Fax: (07) Easifleet Management Canberra Contacts: Patrick Conway Tel: Page 12 Version 04 - January 2005

16 Easi-Home Loans AUSTRALIAN CATHOLIC UNIVERSITY SPS in partnership with Easi-Home Loans are able to provide you with a free service that may save you thousands of dollars every year in interest and bank associated costs involved with your home loans and/or investment loans. Their services have the potential to save you money even if it is not cost effective to package your mortgage from your pre-tax salary. Easi-Home Loans Pty Ltd Melbourne Level 16, 10 Queens Road Melbourne Victoria 3003 Phone: Easi-Home Loans are one of Australias fastest growing mortgage origination companies and are allied with Australia s largest mortgage origination group AFG. Through AFG their Finance Managers have access to over 40 Banks and Financial Institutions Australia-wide and are able to provide a free, unbiased service to enable you to chose the most appropriate lender and package available to suit your needs. Easi Home Loans Finance Managers will make themselves available 7 days a week, at a time and place convenient to you. Easi Home Loans do more than just home loans, they specialise in all mortgage related areas such as: Investment Loans Refinancing or Debt Consolidations Construction Loans and Developments Mortgage reductions and Budgeting Lines of Credits Commercial or Business Loans Therefore you don t have to be in the process of buying a property to take advantage of their free service, in fact most benefits are realised by taking advantage of a free mortgage review. What benefits will be provided to you and your family? Independent and unbiased opinions between over 40 lenders Saves you the time, effort and the confusion envolved in having to deal with the lender yourself Available to you at a time and place convient to you. Will provide you with the information and knowledge to make fair comparisons Will enable you to look at the big picture, Packages, Credit Cards, Interest Rate Discounts, Savings Accounts, etc Page 13 Version 04 - January 2005

17 Bargain Notebooks Salary Packaging Services Australia Pty Ltd, who administer the salary packaging requirements of numerous employer and employee clients throughout Australia, have teamed with Bargain Notebooks to ensure you are able to access the best deal and pay for it in pre tax dollars. Bargain Notebooks have selected a range of laptops and PDAs specifically for our clients. The range has lower price laptop suitable for home and student use and additional laptops with features to suit all serious users. All laptops and PDAs would normally be salary packaged as they can be bought tax-free. FBT laws allow you to purchase one notebook/laptop & a PDA every FBT year and by using salary packaging, the purchase is made with tax free dollars. Bargain Notebooks specialise in the sale of new and refurbished notebooks and they have tailored packages for SPS clients. They also provide finance and lease facilities. Their brand name laptops are from big brand companies with manufacturer s warranties, offering high quality rigorous testing, The brands include BenQ, IBM, Dell and Toshiba. Bargain Notebooks also offer peripherals such as printers, digital cameras and related networking products. Bargain Notebooks can be contacted on regarding the latest SPS laptop packages or visit their website on Page 14 Version 04 - January 2005

18 QUICK REFERENCE NOTES ON HOW SALARY PACKAGING WORKS The first part of this Guideline provides information on the key things to know about salary packaging, including the benefit items you can package, how you get the best information and how you can get the best deal if considering vehicles, home loans or computers. This section provides insights into the taxation considerations that your remuneration consultant will address for you as well as the processes that SPS and your employer use to process and manage your package. A more detailed summary of the business processes follows this section, which may be helpful if you want a deeper insight into the relevant procedures, including how you can proceed if you choose not to use the services of a remuneration consultant. However, your employer and SPS strongly recommend you obtain the input of a remuneration consultant because the issues associated with salary packaging can be complex and you may miss out on opportunities to maximise your salary. The reference notes in this section include: Lease arrangements explained Fringe Benefits Tax Input Tax Credits and the GST Payments Substantiation documents required for salary packaging Changing or terminating your package Expense claim forms Page 15 Version 04 - January 2005

19 Lease arrangements explained What are the lease arrangements? To package your car using Salary Packaging Services you will need to lease your car using a novated lease arrangement. What is a novated lease? You purchase your car using finance provided to you by the leasing company, this is done using a traditional loan contract. To allow you to salary package, the employer agrees to pay the obligations from your pre-tax wages. The novation agreement is prepared by the finance company and is signed by you, the finance company and your employer. Novation agreements enable you to retain control over the car, novated leases are very common in Australia. Salary Packaging Services assists you to arrange a lease with the finance company for the car of your choice and then to enter into a novation agreement with your employer. Lease payments and other running costs (if desired) are then deducted from your remuneration package. Your employer becomes the lessee of the car and provides it to you, the employee, for your unrestricted use. In other words, as part of your remuneration package the vehicle may be used exclusively by you, your partner or family members, for 100% private use, The novation is current for the term of your employment. If you cease employment with your current employer the novation will terminate and the lease obligations and rights will be transferred back to you. What happens if I leave during the lease period? If you leave your employer during the course of the lease the novation will be automatically terminated and the lease obligations will return to you. What happens at the end of the lease? The novation component of your lease agreement ceases on termination of your employment with your current employer. You may choose to re-novate this with your new employer. Under a novated finance lease, at the end of the lease term the residual, plus GST, must be paid to the lessor (Fleet Manager). This is often achieved by selling the car and entering a new lease arrangement. You may make an offer to purchase the car for the residual value. The residual payment is your responsibility as the novation ceases on lease termination. Page 16 Version 04 - January 2005

20 Under a novated operating lease, at the end of the lease term the car must be returned to the lessor (Fleet Manager) in good condition. Under the novation, any damage restoration costs are the responsibility of the employer, although through a salary packaging arrangement any costs would be borne by you, the employee. What other matters need to be considered? Only leased cars can be packaged using Salary Packaging Services. The car may be new or second hand. Fringe Benefits Tax A fringe benefit is a payment to or on behalf of an employee but in a different form to salary and wages. They are basically non-cash benefits provided in lieu of salary or wages. A Fringe Benefits Tax (FBT) is a tax on these fringe benefits. It is designed to overcome past deficiencies in the income tax laws which allowed employees to receive part of their salary as tax free non-cash benefits. FBT ensures that tax is paid on benefits that are provided to employees, in place of, or in addition to, salary and wages. FBT is assessed on an annual basis, with the FBT year running from 1 April to 31 March. While FBT is payable by the employer, the costs are passed on to the employee and SPS remuneration consultants work this out for you and build the cost into your fortnightly deductions so you do not have to worry about meeting the expense at the end of each FBT year. As indicated earlier in this Guideline, the application of FBT differs for various items you can package. The good news is that as an organisation known as a Rebatable entity for taxation purposes, employees of Australian Catholic University only pay 52% of the applicable FBT for the first $ of your items packaged. The formulas for working out the FBT payable are complex and it is recommended you arrange for your SPS trained remuneration consultant to work this out for you. Input Tax Credits and the GST Some benefits that can be packaged are subject to the Goods and Services Tax (GST). Where this is the case your employer will be entitled to claim input tax credits on some of these items concerned. Where input tax credits are claimable, SPS will provide a report back to the employer detailing individuals input tax credits. The employer will claim the credits and ACU policy states that your employer may choose to pass on 50% of the benefit of this credit at the end of the FBT year. Page 17 Version 04 - January 2005

21 The formulae to calculate the FBT payable on benefits you package will differ depending on whether the item is subject to GST. Your SPS trained remuneration consultant is trained to work this out for you using the applicable Australian Tax Office (ATO) formulas. Payments The approved method for payment of salary packaging benefits is by Electronic Funds Transfer (EFT) only and all payees must accept EFT transactions. Wherever possible SPS will pay the benefits by EFT to the provider concerned. Some companies and organisations to whom benefits are payable may levy additional charges where the payment is not made in accordance with their preference and some do not accept EFT payments. Payments by cheque have been excluded and the employee will have to pay the benefit and be reimbursed* by SPS. * A client reimbursement is made when the employee pays for a benefit and SPS reimburses that expense to the employee from the pre-tax funds accumulated in employees account held by SPS. However, if the payment is for a lease, for example, SPS will pay the lease payment direct to the financial institution. If the payment is for motor vehicle repairs the employee lodges a reimbursement claim form and the funds are paid into the employee s account when they are available eg. If the employee breaks a windscreen and pays for it on their credit card and the employee has nominated $20 per fortnight for repairs the reimbursement cannot be made until sufficient funds are in the account to cover it. That being the case the funds will be reimbursed into the employee's bank account within 4 business days after SPS receives the advice. This holds true for all payments the funds must be in the account to be able to pay the benefit. If you wish to purchase a computer for $3,000 you can make regular deductions from your pre-tax salary to SPS until you have sufficient funds in your account to make the purchase. Or you can pay for it initially and arrange for the cost to be reimbursed on a fortnightly basis by EFT to your bank account. Page 18 Version 04 - January 2005

22 Substantiation documents required for salary packaging Salary packaging requires proof that a benefit has been provided and that the packaging was not merely a device to avoid tax hence there is certain documentation that is required prior to the payment of benefits. Tax Invoices are required where they are applicable. Where there is an entitlement to Input Tax Credits and no tax invoice is provided the FBT will be calculated on what is termed the higher grossed up rate and the Input Tax Credit cannot be claimed. SPS is unable to make any payments where inadequate substantiation documentation is held. Substantiation documentation includes: Mortgage expense, Rent expense, credit card reimbursement or other non-gst expense An ongoing declaration form can be completed. An original statement should be attached to this. Motor Vehicles A copy of the tax invoice and a copy of the lease agreement and deed of novation are required. Petrol & Oil If a Motorcharge card is provided by SPS - no substantiation required. Expenses met by credit card or cash require tax invoice/receipt and the odometer reading to be supplied each month with a reimbursement claim form. A tax invoice is required for expenses of $55 or more. Registration, Insurance, Maintenance & Repairs No tax invoice/receipt is required for the SPS Motor Insurance Scheme. A tax invoice/receipt attached to a claim form where the Motorcharge card cannot be used. Notebook Computer A copy of a tax invoice showing the amount of the notebook computer, the type, and the details of the payment. Only one notebook per FBT year is exempt from FBT. If it is a reimbursement show the bank account name, number & Bank, BSB number where the reimbursement is to be deposited - a reimbursement claim form is required with tax invoice attached. Utilities Tax invoice/receipt attached to a reimbursement claim form. A tax invoice is required for expenses of $55 or more. Please send original receipts for claims in the post direct to Salary Packaging Services Australia Pty Ltd at Locked Bag 4000, Melbourne, Victoria Page 19 Version 04 - January 2005

23 Changing or terminating your package Employees can revise their packages within the benefits available, once a year on the anniversary date of the package. If the package is varied during the year it will attract an administration fee of $50 (including GST) in addition to the usual fortnightly administration fee. With the agreement of the University, employees can decide to wind up their packaging arrangements during the year and transfer back to receiving their remuneration solely as gross salary. Should an employee leave the University: Should an employee terminate the package prior to the completion of a package year, the outstanding balance of the packaging fee for that year will be due and payable. If an employee leaves during a package year then the employee's actual expenditure will be compared against the budgeted expenditure and a report will be provided to the employer and the employee by SPS. If an employee has overspent then the employee will be required to pay back the difference to the University. Alternatively if an employee has spent less than the budgeted amount then the difference will be included in calculating any entitlements the employee is owed and the appropriate tax will be deducted. The final payment to the employee cannot be made until the package (including the fuel card) has been reconciled. This will normally be the end of the first week of the following month. Expense claim forms An Expense Claim Form is included in the back of the Guideline. Just add your details and send the completed form to SPS. To assist the speed and ease of processing, please ensure that you fill out the form completely. Please remember: You will need to send a hard copy version to SPS to verify your claim. Simply print out the page once you ve completed it and post it to SPS, Locked Bag 4000 Melbourne Victoria You will also need to send a receipt for the item purchased to substantiate the amount being reimbursed. Payments are processed back to you with the same frequency as your payroll. For example, if you are paid fortnightly, you will receive fortnightly reimbursements over the life of your package. All transactions are generated electronically and as yet, do not allow for payment of credit cards directly. You will receive the reimbursement as a direct payment into your bank account. Page 20 Version 04 - January 2005

24 To help you complete your details, we have provided an example of the process: Mr Sample sends in a claim form for the registration of his vehicle. The registration is $480 per annum. His Salary Package contains a package item for vehicle registration of $18.46 per fortnight. Mr Sample started his package on the 11 th May and pays his registration on the 6 th September. Mr Sample receives his pay on a fortnightly basis. He has therefore collected money for his registration for nine fortnights. He will receive $ (9 $18.46) and then he will then receive $18.46 each fortnight for the rest of the package year. This process will be the same for all Expense Claim Form reimbursements. Once the substantiation documentation is received and verified, whatever amount you have stated as your package will be the amount paid. This amount will be the maximum paid to you and will be paid at the same frequency as your Payday. Any additional substantiation on top of this amount will be processed for the next Pay date. Fully Automated for Your Convenience Our fully automated system means that once you ve set up your claim, you do not need to process it again. The system automatically generates an entry when the due date comes up. Please be aware that the frequency of payment complies with the frequency of your payroll. However, the system will not recognise the amount for payment until the due date. Sometimes the due date of the payments will not coincide with your payday. Please don t be concerned, the system will rectify this when your next payday comes around. Page 21 Version 04 - January 2005

25 Appendix A Internal Salary Packaging Employee Checklist To assist with your preparation for the development or modification of a Salary Package, you will need to consider the following: Obtain a letter from Personnel Relations & Equal Opportunity confirming eligibility to participate in Salary Packaging at Australian Catholic University. Contract End Date (if a fixed-term member of staff): / / Do you currently have any pre-tax deductions made from your salary: Superannuation Parking Deferred Salary Motor Vehicle Mortgage or Rent Credit Card Notebook / Laptop Other Do you have any non-standard tax amounts that may impact on Salary Package calculations: HECS Financial Supplement Zone, dependant spouse or special tax offset Variation to withholding tax Tax offset for an annuity or superannuation pension $ $ $ $ $ $ $ $ $ or % $ or % $ or % $ or % $ or % Do you have any other income amounts that may impact on Salary Packaging benefits, for example: Investment Income (Shares, Property, etc) Other Employment Income Other Income Do you have any tax expense amounts that may impact on Salary Packaging benefits, for example: Investment losses (Shares, Property, etc) Other losses $ $ $ $ $ Is the Mortgage or Rent for your own home: Do you have any plans to increase or decrease your fraction, to take leave without pay or leave on half pay, that would impact on Salary Packaging: Please remember to take your letter confirming eligibility to participate in Salary Packaging at Australian Catholic University and a recent payslip to your meeting with SPS representatives or your independent accountant or financial adviser. Page 22 Version 04 - January 2005

26 Appendix B Sample letter of eligibility to participate in Salary Packaging at ACU <Date> To Whom It May Concern The purpose of this letter is to confirm that <staff member s name> is currently employed with the Australian Catholic University on a <continuing/fixed-term> basis. <Staff member s name> is currently employed <full-time/part-time> <fraction> on a gross salary of $<xx,xxx> per annum. Based on this confirmation <staff member s name> is eligible to participate in Salary Packaging at Australian Catholic University. Yours Sincerely Diana Chegwidden Manager (Staff Services & Employee Systems) Page 23 Version 04 - January 2005

27 Appendix C Salary Packaging Employer Checklist EMPLOYEE NAME: PAYROLL NUMBER: Annual salary confirmed as correct Fraction confirmed as correct Fixed-term eligibility confirmed Current pre-tax deductions confirmed Any planned LWOP at the time of salary packaging Any planned leave on half pay at the time of salary packaging Any planned change in fraction at the time of salary packaging Proposed package does not exceed 50% Financial advice has been sought and evidence provided Fully / partial / non maintained lease recorded by ACU for eligibility to claim kilometres travelled The above salary package satisfies ACU policy requirements: Confirmation provided to Salary Packaging Services (SPS): Date: The above salary package does not satisfy ACU policy requirements for the following reason/s: Notification of reason/s for non-confirmation provided to Salary Packaging Services: Date: ACU Personnel Relations & Equal Opportunity Salary Packaging Representative: Signature: Date: /./. Page 24 Version 04 - January 2005

28 Appendix D - SPS Remuneration Consultants Australian Capital Territory Ron Tollenaar Salary Packaging Services 281 Goyder Street NARRABUNDAH ACT 2604 Tel: (02) Fax: (02) rtollenaar@salarypackaging.com.au New South Wales Jim McNeilly Money Matters Financial Services Level 4 2 O Connell Street Sydney NSW 2000 Tel: (02) Fax: (02) jmcneilly@salary - packaging.com.au Victoria Ms Angela Pallas Remuneration Consultant Salary Packaging Services 4/179 Queens Street Melbourne VIC 3000 Tel: (03) Fax: (03) apallas@salarypackaging.com.au Ray Thomas Remuneration Consultant Salary Packaging Services 4/179 Queens Street Melbourne VIC 3000 Tel: (03) Fax: (03) rthomas@salarypackaging.com.au Queensland Rick Watts Remuneration Consultant Salary Packaging Services Shop3 Nambour Plaza, Cnr Ann & Harard Street Nambar QLD 4560 Tel: (07) Fax: (07) rwatts@salarypackaging.com.au Page 25 Version 04 - January 2005

29 Appendix E Client Details Form Given Name Middle Surname Title Preferred Name Date of Birth Address City/Suburb State Postcode Work Phone Home Phone Address Commencement Pay Date Employment Details Employer s Name Employee Number Workplace Address Mobile Phone Facsimile Position or Title Salary $ City State Postcode Personal Bank Account Details (for any client reimbursements) Account Name Bank Branch BSB Number Account Number I confirm that this is an accurate indication of my circumstances. I acknowledge SPS employees are not qualified to provide financial, government payment or taxation advice and no information received from any SPS employee should be considered as such. I understand that salary packaging may impact on HECS, child support and various government payments and it is my responsibility to disclose that I will be salary packaging to the relevant authorities immediately and this may impact any payments I receive. Signature Date Disclaimer: Your salary package will be based on the above information. If any of this information changes please notify SPS immediately. Salary Packaging Services Australia Pty Ltd Privacy Statement Your personal information is protected by law. SPS collects personal information to be used by your employer and ourselves for the following purposes: To allow SPS to establish and maintain your salary package Meet all collection, payment and reporting obligations To research and develop our products and service To identify and communicate where other products and service may be of benefit. Your personal information may be disclosed to your employer or third party service providers that you engage such as lease companies, mortgage providers and providers of salary packaging, taxation and financial advice for the purpose of establishing and maintaining your salary packaging. We may disclose relevant personal information to external organisations who help SPS establish, maintain and report on your salary package. These organisations are bound by our confidentiality arrangements. Unless required by law, your personal information will not be disclosed to any other person or organisation. Page 26 Version 04 - January 2005