FINANCIAL MOMENT

What is salary sacrificing and salary packaging all about?

Simon Ashman is a Financial Planner with Strategic Invest Blue. He is passionate about helping clients improve their financial position so that they can live their best possible lives.

He enjoys taking the time to best understand the long-term goals that matter most to his clients and knows that for these goals to be achieved, key strategies need to be taken advantage of.

These strategies include salary sacrifice and salary packaging. Here, Simon shares his insight on both.

WHO doesn’t want to make the most out of their hard-earned income and see more of it in their pocket or in their super fund?

As experts in the field, we’re here to talk through options and set up tailormade strategies for our clients that will make their goals attainable.

At Strategic Invest Blue, that’s what motivates us most – celebrating the wins of our clients.

Salary sacrificing and salary packaging are two options that present financial planners with the opportunity to help their clients reduce their taxable income.

Salary sacrifice can be an extremely effective strategy to boost retirement savings, while salary packaging can result in additional income being paid into your bank account regularly (fortnightly, for example).

Salary sacrifice – the basics

Salary sacrifice is when your employer withholds income from your pretax salary and instead of it being paid to you as part of your regular income, it goes into your superannuation fund.

A before and after comparison

John wants to start boosting his retirement savings and decides to start salary sacrificing $10,000 a year from his pre-tax salary. John is on a salary of $90,000 plus super.

Key benefits

Through salary sacrificing, John will save $3,150 on income tax whilst his take-home pay will only reduce by $6,550.

He will still receive his usual 10 per cent employer contribution, plus his salary sacrificed contributions.

John’s super will increase by $8,500 for the financial year, meaning that he is $1,950 better off overall.

How do I know if salary sacrifice is right for me?

You need to seek advice from a professional to determine if salary sacrifice is right for you. An expert will take into account your circumstances and provide advice if there are advantages to be had.

If it is, how do I work out how much money to set aside?

Again, seeking professional advice is advisable on this one as it’s important that your finances are assessed holistically. A financial planner can help you work out how much extra salary you should set aside.

Can salary sacrifice be arranged through a financial planner?

Salary sacrifice needs to be arranged through your employer, but a financial planner can help you with the relevant information required.

Is there a downside to salary sacrifice?

Something to consider with salary sacrifice is that once the money you’ve set aside or ‘sacrificed’ is sitting in your superannuation fund, it cannot be accessed until a condition of release is met.

In most cases, this is when you retire or when you turn 65.

This makes it a very effective strategy for people close to retirement or for those with income not needed for the foreseeable future, but less appealing to those for whom retirement is still a long way off.

Salary packaging – a brief overview

Salary packaging is similar to salary sacrifice in that your pre-tax income is used to cover certain expenses.

Both strategies are effective in reducing the amount of tax you pay. However, there is one fundamental difference.

The benefit of salary packaging (versus salary sacrifice) is that you can access funds immediately. This makes it a strategy with broad appeal, given that many of us are in the midst of busy careers and raising families.

Retirement seems a lifetime away. The question often pondered is, ‘why wait when we can potentially access extra income now?’

Some sectors offer salary packaging as part of their employment and in most cases, salary packaging can be a significant benefit to employees and should be taken advantage of.

Those in healthcare or working for a not-forprofit can elect to receive a portion of their income to cover expenses.

These might include smaller everyday costs such as meals or leisure/entertainment expenditure, or it may be used toward more significant spending such as car or mortgage repayments.

For example, employees of not-forprofit organisations can package up to $15,900 per annum, whilst healthcare employees can package up to $9,010.

This money is essentially an employee’s tax-free income and can be used for most things, except cash withdrawals.

If someone working as a nurse earned $90,000 their marginal tax rate would be 34 per cent, so they would pay $3,063 tax on earnings of $9,010.

If they elected to salary package this instead, they wouldn’t pay any tax and would be able to use the whole $9,010 towards expenses.

Am I entitled to salary packaging?

Salary packaging is available to employees in industries beyond the healthcare and non-forprofit sectors. It is simply a question of whether an employer offers it.

However, if not currently offered, employees can ask their employer to establish an arrangement by which the employee can salary package.

Salary packaging in industries beyond those already outlined may involve your pre-tax income being used to pay for purchases such as a new car (this is sometimes known as a ‘novated lease’) or on items used in the workplace such as laptops.

Whilst the overall benefits are not as significant as for those in the healthcare or non-forprofit sectors, should your employer offer salary packaging it is certainly worth considering - particularly for something like a car purchase, as it may work out to be more cost-effective than a car loan or redraw on a mortgage.

Find out more

Whether it be to discuss the strategies outlined here or for guidance on other financial matters, we’re here to help.

We provide expert, tailored advice to people at the many different stages of life’s journey be it first home buyers, young families, empty nesters or those nearing retirement.

We see the opportunity to guide clients on their path to financial freedom as a privilege, and we look forward to being of assistance.

Please contact us for a complimentary consultation.

About Simon Ashman

Simon Ashman is Tassie born and bred and has been with Strategic Invest Blue since 2008. He brings a dynamic approach to his work and relishes the opportunity to learn what his clients most want for themselves and for their loved ones.

As dad to daughters Lucy (5) and Margot (3), Simon understands that it is often a question of balancing what to set aside for those long-term dreams whilst still having enough time and money to enjoy the precious here and now with a growing family.

Without salary sacrificing With salary sacrificing

John’s salary $90,000 $90,000

Salary sacrifice 0 $10,000

Tax $19,717 $16,567

ESG (10%) $9,000 $9,000

Take home pay $69,983 $63,443

Tax in super (15%) $1,350 $2,850

Total Contribution $7,650 $16,150

Salary sacrificing comparison. This table is reflective of one financial year

design your one of a kind future. it’s possible!

P (03) 6220 8330 E advice@strategicfp.com.au W www.strategicfp.com.au

Carer Lesley Field has benefitted greatly from using the Carer Gateway

Lesley’s caring role

LESLEY Field, 67, has been a carer for her daughter Amy, who has mental ill health, for the past 17 years.

Lesley says her responsibilities include preparing meals, personal care, taking Amy to appointments with GPs and health institutions, navigating support services, and meeting loved ones.

She says it is a hard job with long hours, no pay and traditionally no support system.

On top of her caring role, Lesley has her own health complications. She suffers from a disease called bronchiectasis - a rare genetic condition where the walls of the bronchi are thickened from inflammation and infection - along with chronic fatigue.

Lesley is one of more than 80,000 Tasmanian unpaid informal carers of a loved one with disability, mental ill health, chronic or lifelimiting condition, drug or alcohol dependence or who is frail or aged.

Across the 17 years that Lesley has been a carer for her daughter, her experience of accessing support was hard to navigate because services were spread across many different organisations doing similar things but in different ways.

“As a carer, your time is not your own. I spend all day supporting my daughter with almost every part of her life, and there is almost no time left for me,” Lesley said.

“Before Carer Gateway, I found I often got lost in the maze of different services and hoops I had to jump through.

“Carer Gateway is like a breath of fresh air. One phone number and one website.”

Carer Gateway is an Australian Government initiative designed to bring all supports into a single service with one service provider. Care2Serve, the service arm of Carers Tasmania, is the provider for Tasmania.

The Carer Gateway helps family and friend carers to navigate the services, such as My Aged Care and NDIS, and provides referrals, plus a range of other supports such as free counselling and coaching, connection with other carers in the same situation, coordination of residential respite, and tailored support packages.

“Since Carer Gateway launched in the middle of the pandemic, we have been able to support thousands of carers across Tasmania,” Care2Sere and Carers Tasmania CEO David Brennan said.

“Carers often tell us how much simpler it is to call one number and find out about all the supports available to help them in their caring roles.

“Many don’t see themselves wearing a carer’s hat, as well as being a parent, child, sibling, grandparent, grandchild or neighbour.

“In Tasmania, one in six people are a carer. Many families are caring for someone and don’t know that we are here to help.”

Lesley has been able to access support through Carer Gateway that has improved her capacity to provide care for Amy.

“The support I received through counselling greatly assisted me in coping with the stresses of being a carer,” she said.

“Amy recently contracted COVID, leading her to become very frail, as she now lives with her fiance who suffers from mental health issues as well.

“I often take carer role for both of them, sometimes via phone as I have limited movement due to the pandemic.

“Since I am immune suppressed, I don’t leave home often. Many carers in my circle, who I have met through carer workshops over the years are worried about catching COVID too.

“I recently became aware of the COVID help at Carer Gateway. This is a sigh of relief. If something happens to us carers, they can help us with groceries, medication, accessing RATs and putting us through to the right services.

“I recommended anyone who is a friend or family carer caring for someone to get on the phone and speak to them. They’ll help you with any questions you may have or guide you in the right direction.”

If you are in a similar situation and need help with your caring role, contact Carer Gateway. Contact 1800 422 737 (and select 1 from the menu) or check the website at www. carergateway.gov.au

Calvary can support you to stay at home longer with your Home Care Package

Your lifestyle, your health

MANY older Australians want to live independently in the familiar surroundings of their own homes for as long as possible.

Calvary Community Care has supported people in their homes and communities for more than 30 years and delivers a range of aged care, disability and other support services that foster independence, improve social connections, and promote positive health and wellbeing.

As a well-known provider of Healthcare in Tasmania, Calvary also operates Lenah Valley and St John’s private hospitals in Hobart, St Luke’s and St Vincent’s hospitals in Launceston, as well as residential aged care facilities.

People who have attended a Calvary hospital can continue to receive high quality care in their home either through their existing packaged funds or privately. Calvary can also assist people to navigate the service system and access available funding for services where eligible.

A Home Care Package is an allocation of funding available to eligible senior Australians that supports them to live in their homes for as long as they can and choose to.

There are four levels of Home Care Package with different funding amounts, ranging from $9,026 to $52,378 a year. The funding packages cover products and services to meet a range of care needs, offering basic support through to complex support.

Living well at home means different things to different people. Some people would like cleaning, assistance in the garden such as mowing the lawn, or preparing meals. Others might need nursing and podiatry, or personal care like bathing and getting dressed.

It may even mean home modifications, social connections, pastoral care or a break for caregivers.

Australia’s ageing population means it is not only older Australians who should prepare for future care needs; but their families and friends who need to open the conversation and be informed about what services are available for their loved ones.

“Finding assistance immediately after an event can be stressful,” Calvary General Manager Jane Lajoie said.

“Talking about future care needs early means that families can feel safe and prepared.

“At Calvary, our integrated model of care aims to ensure we celebrate and support our people to live a high quality and dignified life in a safe and caring environment.

“We build strong sustainable links between the aged care, community and hospital sectors to provide people and their families with a seamless, coordinated and integrated journey at any stage of their lives.”

For more information on Calvary services, contact a Care Adviser on 1300 66 00 22.