The reason it increases your reportable income is because, now you are salary packaging, your net take home has increased. To fairly assess your entitlements, the Australian Government applies the Grossed Up rate to assess what you would then need to earn without salary packaging, to take home the same net pay as an estimate.
| Without Salary Packaging | With Salary Packaging | |
| Fortnightly gross salary | $3,269.23 | $3,269.23 |
| Pre-tax deductions | $0.00 | $713.45 |
| Taxable Income | $3,269.23 | $2,555.78 |
| PAYG Tax | $628.62 | $412.88 |
| Medicare Levy | $65.38 | $51.12 |
| Post Tax Payments | $0.00 | $0.00 |
| Net pay to employees bank account/s | $2,575.23 | $2,091.78 |
| Salary packaged Payments | $0.00 | $713.45 |
| Net Salary | $2,575.23 | $2,805.23 |
| HELP Debt | $0.00 | $0.00 |
| Net Take Home Pay | $2,575.23 | $2,805.23 |
How does this affect HECS-HELP Repayments?
As you may already know, your HECS-HELP repayments are structured based upon your income.
The income it is assessed against, is your Reportable Income. Due to Salary Packaging, your HECS-HELP Repayments then in turn, increase. The increase however, still leaves Salary Packaging as advantageous, please see example below:
| Without Salary Packaging | With Salary Packaging | |
| Fortnightly gross salary | $3,269.23 | $3,269.23 |
| Pre-tax deductions | $0.00 | $713.45 |
| Taxable Income | $3,269.23 | $2,555.78 |
| PAYG Tax | $628.62 | $412.88 |
| Medicare Levy | $65.38 | $51.12 |
| Post Tax Payments | $0.00 | $0.00 |
| Net pay to employees bank account/s | $2,575.23 | $2,091.78 |
| Salary packaged Payments | $0.00 | $713.45 |
| Net Salary | $2,575.23 | $2,805.23 |
| HELP Debt | $130.77 | $214.61 |
| Net Take Home Pay | $2,444.46 | $2,590.63 |
How does this affect my Family Tax Benefits? (FTB)
Centrelink uses your adjusted taxable income (ATI) to calculate Family Tax Benefit eligibility.
ATI includes taxable income plus Reportable Fringe Benefits which in-turn may reduce your entitlements for FTB as your ATI appears higher.
How does this affect my Child Support Agency (CSA) Assessment?
The Child Support Agency also uses your adjusted taxable income to determine payment obligations.
Just like for FTB and HECS, your reportable fringe benefits are included. Salary packaging may increase your assessable income for child support, potentially raising your required payments.
In Summary
Salary packaging can reduce taxable income and increase take-home pay.
However, reportable income may rise, affecting:
HECS-HELP repayments
Family Tax Benefit entitlements
Child Support obligations
Always check how your packaging arrangements are reported on your payment summary (income statement).
Always declare with Eziway if you have any of the above entitlements or obligations
Seek advice from a registered tax agent or financial adviser to understand the full impact
For additional information, feel free to contact your Dedicated Client Service Officer!
Disclaimers:
This information is general in nature and does not constitute financial or tax advice. Individuals should seek advice specific to their circumstances.
