By Sinnotts Accountants & Fennell West.
Do you work in the health industry? If so, you need to be preparing for recent Federal legislation that will significantly impact your salary packaging entitlements.
Effective from 1 April next year, the Government will impose a $5000 annual cap on the pretax dollars you can spendÂ on your meals and entertainment card.
For those of you not in the industry, health professionals and others in the non-profit sector previously enjoyed an unlimited fringe benefit tax break for meals and entertainment.
From the start of the new Fringe Benefit Tax year (April) meal and entertainment expense claims will be reported on electronic payment summaries and the tax break will cease once the $5000 grossed up cap is reached.
Depending on the level to which you used your meal and entertainment entitlement in the past, this change could significantly impact your taxable income, which then obviously reduces your take-home pay.
Weâ€™re aware of instances where things like holidays, weddings and restaurant dining was able to slash peopleâ€™s annual taxable income by more than 50 per cent.
A Productivity Commission report in 2010 found that not-for-profit workers were forgoing between $10,000 and $30,000 in wages when compared to peers in similar roles in the private sector.
In general terms, the cap will mean a higher percentage of income will be taxable for most workers in the health industry.
You need to start thinking about not only how this will impact on the amount of tax you pay in 2016-2017, but how your revised income level will impact HECS debts, Centrelink payments, Child Support and your personal cash flow.
It is also important to use the next three months with unlimited access to meals and entertainment benefits wisely. Everyone has the right to arrange their finances in a way that reduces their tax to a minimum.
There is a whole host of complexities around the introduction of the cap and the timing of reimbursements. Depending on your personal circumstances, you may even need to consider whether itâ€™s worth renewing your meal and entertainment card at all.
To discuss this further please contact Sinnotts Accountants or Fennell West.