Hi, this topic is actually very helpful and should be looked by our fellow forumers here who intend or has relocated to Australia.
Most of new migrants and even other established migrants in Australia are not aware of some schemes that are helpful in reducing their annual tax expenses from employment and other income. Actually even some Australians, without the help of tax practitioners, are not aware of these schemes. One of these is the "salary sacrifice" which I will be discussing in this post.
Salary sacrifice is forgoing a part of your employment income on a permanent basis in order to receive a lower salary that will be subjected to income tax at the end of the income tax year. Though this can be agreed verbally, it is advised by the Australian Tax Office to have this agreement in writing in order that both parties will have a reference if needed in the future.
Depending on the agreement between the employee and employer, the employee will be entitled to receive other benefits such as fringe benefits, exempt benefits, and superannuation in lieu of the portion of the forgone salary.
Fringe benefits may be in the form of cars, property, or expense payments (loan repayments, school fees, etc.) that the company may provide to the employee in exchange for the salary sacrificed by the said employee. These benefits are not taxable as compensation income by the Australian Tax Office but is taxable as fringe benefits tax against the employer thus the prospective employer may have some reservations in providing these to employees.
On the other hand, exempt benefits are exempt from fringe benefits tax and are considered as work-related expenses. These may be expenses for the purchase of electronic devices, books, clothes, etc. that are used by the employee in performing his/her work. Since the company will usually provide these to employees I do not see any added advantage for an employee to forgo his/her salary for these benefits.
Lastly, employees commonly forgo part of their salary in order to contribute for their superannuation. This form of employee contribution is usually called concessional contributions and is subject to 15% tax instead of the salary sacrifice being include as part of an employees employment income and subjected to the graduated individual tax rate. However employees opting for this form of a salary sacrifice should note of the concessional contribution cap of $25,000. Any amount in excess of the concessional contribution cap will be taxed at the rate of 31.5%.
Among the three forms of salary sacrifice mentioned above, I suggest fellow migrants to go for the superannuation benefit as this will help you reduce your tax expenses and at the same time quickly building up your super fund.
(Disclaimer: Information mentioned above are based on general reading and you are advised to consult a tax professional for more detailed information.)
P.S.: Practicing for IELTS Written exam 🙂