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EMPLOYEE HANDBOOK Novated Motor Vehicle Leases Associate Motor Vehicle Leases
LAFHA Remote Area Allowances Exempt Benefits
EMPLOYEE HANDBOOK2
REDITUS
EMPLOYEE
HANDBOOK
3EMPLOYEE HANDBOOK
EMPLOYEE BENEFIT BOOK
W e have prepared a wide range
of benefits matching your
Company’s tax status and objectives
with the best interest of the employees
in mind.
We ensure that these benefits are
constantly reviewed and benchmarked
against “best practices” to reflect a high
standard in the field of salary packaging
and employee benefits. However, the
Company reserves the right to make
appropriate modification to incorporate
changes in taxation and guarantee its
efficient management.
You may structure your package, given
the information and the parameters set
in this Handbook, together with the
assistance that will be given by Reditus
salary packaging consultants.
This Employee Benefit Book is designed to provide comprehensive information to employees interested in the salary packaging offered by your Company. The offer for benefit packaging presented here is available to all employees.
P.14 Associate Motor Vehicle Leases
P.16 Living Away From Home Allowance
P.18 Remote Area Allowances
P.20 Exempt Benefits
P.7 AssessmentProcess
P.9 Novated Motor Vehicle Leases
P.4 Corporate profile
P.5 An overview of salary packaging
CONTENTS
EMPLOYEE HANDBOOK4
CORPORATE PROFILEReditus Group is a financial service consulting firm providing ground-breaking ideas for
your salary packaging and administrative outsourcing needs. Reditus has long made a
mark in the industry for its comprehensive advice and professional service.
FINANCIAL SERVICES
We have par tnered with Austral ia’s
leading independent f inancial planning,
investment, superannuation and
stock brok ing companies so Reditus can
offer you the best f inancial ser vices.
Reditus offers the fol lowing professional
f inancial ser vices:
Financial planning
Investment advice
R isk assurance: Li fe, disabil i ty and
income protection insurance
Group insurance policies
Corporate superannuation plans
Stock brok ing and por tfol io
managment
Mor tgage brok ing and lending
Reditus has established a nationwide
presence through its network of
par tners across Austral ia’s capital
c it ies and regional centers in
order to meet your investment and
f inancial planning needs r ight where
you are.
SALARY PACKAGING
We provide the technical exper tise
in sett ing up your remuneration
structure. I t includes an interactive
discussion about the basic
elements of salar y pack aging, a ful l
explanation of the benefits avai lable,
and real l i fe examples and pack age
strategies.
FLEET SERVICES
We save you the t ime, money, with
our Novated and Associate Leases
and Fleet Management ser vices.
Reditus provides special ist advice
to employees with lease vehicles
options as par t of your salar y
pack aging arrangements.
EMPLOYEE HANDBOOK 5
TRADITIONAL REMUNERATION SALARY OR WAGES
Australian employees have always been
paid following a strict salary or wage basis.
The Australian Industry Awards have always
been resolute on giving minimum level of
cash salary to employees. As a result, a salary
package that offers additional benefits as
well as the cash salary of employees was
never an option. It was only in the late 1980’s
that employer superannuation became a
part of the remuneration package for most
Australians.
WHAT IS SALARY PACKAGING?
Salary packaging is a remuneration structure
allowing an employer to provide tax exempt
or concessionally taxed benefits to their
employees other than cash salary. In this
context, benefit is defined as the payment or
provision of goods, services by an employer in
behalf of its employee.
AN OVERVIEW OF SALARY PACKAGING
Essentially, employees are actively encouraged
to take advantage of the benefits of salary
packaging by the Australian Tax Office and
other government departments, in order to
maximize their after tax income. In fact, ATO
recognizes salary packaging as a legitimate
form of taxation planning. It has now become
an industry best practice as employers and
employees are given greater flexibility in
negotiating for employment packages.
In a general sense, salary packaging allows an
employee to receive non-cash payments as
part of his or her remuneration in the form of
fringe benefits, on top of his cash salary. The
main purpose of this type of compensation
scheme is for an individual to get the most
out of his net remuneration (after tax income).
In deciding to get paid with benefits in place
of monetary income, employees can defer
standard taxation rates by
opting for Fringe Benefits.
EMPLOYEE HANDBOOK6
Tax benefits advantage by reducing
tax payable on their salary thus
maximizing after tax income
A broad range of employee benefit
options that best suits their own
personal or family situation.
SALARY PACKAGING OFFERS EMPLOYEES
WHAT ITEMS CAN I PACKAGE?
In some form or another, salary packaging was already practiced even before the
enactment of the Fringe Benefit Tax legislate in 1986. Any non-cash or fringe
benefits paid to an employee were not subject to tax. It was only when the Federal
government passed a legislation requiring income in all forms to be subject to
taxation were non-cash benefits were subjected to the policy.
HOW DOES IT ALL WORK?
The Reditus Group was engaged to manage the salary packaging process and
supervise payments for your Company. All completed forms will be sent to payroll
which will determine your new remuneration structure consisting of a cash salary
and salary packaged benefits. These salary packaged payments will be paid to
other parties on your behalf.
Once the package is completed and implemented, the you become a client of
Reditus. We will provide you the necessary assistance and support in all matters
concerning your salary package.
All the payroll functions in relation to your salary packaging including the
particular benefit, lease payments and allowances shall be managed
and paid through Reditus Group. The payment of your net pay and
superannuation will remain with your payroll department.
1 2
3 4
5
EMPLOYEE HANDBOOK 7
The following steps are critical for a salary packaging process to be successful. You will:
A successful salary packaging arrangement is a product of a comprehensive assessment of each
employee’s financial needs. Every employee will have the opportunity to thoroughly discuss
their salary packaging requirements and seek the professional advice and expertise of our salary
packaging consultants.
Attend a group presentation detailing
the various benefits available
Engage in an individual consultation on
the expected ouctomes of the packaging
Complete all the application
requirements
Receive a disclosure report on the
completed salary package
Enjoy the benefits of maximising your salary
EMPLOYEE HANDBOOK8
EMPLOYEE SERVICES
Employees’ access to quality information
about these benefits is always at the forefront
of Reditus business with knowledge as a core
philosophy. Information will be provided
at all times through this Employee Benefit
Book, regular conduct of group presentations
and from the seasoned advice of our salary
packaging consultants that can be reached
through telephone, email, or fax.
You will be given access to our online services
where you can:
View your transaction statements
Change your personal detai ls
Maintain motor vehicle logbooks
Enter vehicle odometer readings
Access application forms
Download addit ional information
+ More
AN OVERVIEW OF SALARY PACKAGING
EMPLOYEE HANDBOOK 9
NOVATED MOTOR VEHICLE LEASES
ATO Reference: IT2509
SALARY PACKAGING BENEFITS
A Novated lease is a tri-partied financial arrangement between the employee (as the lessee),
financier or fleet manager (as the lessor and the employer.
In a Novated lease agreement, the fleet manager leases a vehicle to the employee and novates
the responsibility to pay for the lease to the employer. During the lease term, the employee
will have full and unrestricted use of the vehicle. In the event of an employee termination
of (resignation, redundancy or other termination) , the novation agreement expires and full
accountability reverts to the employee. The vehicle remains the responsibility of the employee.
Since the concept of Novated leases is now common among employers, transfer of
arrangements from one employer to another is already a simple transaction for the employer
and the employee.
1
2
1. Lease agreement with
Novation to the employer
2. Lease payments from
pre-tax and post-tax
salary
EMPLOYEE HANDBOOK10
Besides the financial component on the lease, employees can have the opportunity
to arrange a fully maintained lease where the monthly lease payment also covers all
running costs of the vehicle such as:
Fuel (petrol card)
Registration
Insurance
Maintenance
Roadside assistance
THE ADVANTAGE OF A FULLY MAINTAINED LEASE INCLUDES:
Turning normally non-deductible motor vehicle operating costs into a pre-tax
deduction;
Allocating a fixed monthly payment for motor vehicle expenses that protects the
cashflow of the employee; and
Eliminating out of pocket expenses of operating the vehicle as
soon as the lease agreement is in place.
FULLY MAINTAINED LEASES
EMPLOYEE HANDBOOK 11
LEASE TYPES
In a Novated lease, the employee can have an added option to structure the lease
agreement into a:
Novated finance lease
Novated operating lease
NOVATED FINANCE LEASE - Residual Payment Required
Once the lease contract is terminated, the employee (lessee) will be required to pay
the calculated residual cost as a percentage of the original FBT value of the vehicle
in order to acquire its ownership.
The employee may have the option to renew the lease
on the vehicle for another fixed term in order to reduce the residual cost of the
vehicle.
NOVATED OPERATING LEASE - No Residual Payment
At the end of the lease period, the employee does not accrue any obligation on
the vehicle other than to return it to the leasing company with no encumbrance,
effectively negating any residual risk on the vehicle.
If the employee decides to purchase it instead, the lessor will have the opportunity
to sell it at the prevailing wholesale price.
EMPLOYEE HANDBOOK12
PLACING EXISTING FINANCE LEASES ‘UNDER MANAGEMENT’
If the company decides to expand the lease package of its employees from a finance
only option to include running costs and associated administration, Reditus can
facilitate the process of transitioning existing leases or even application for new
additions.
RELATIONSHIP MANAGEMENT
Each employee’s requirements will be comprehensively discussed by the fleet
manager to ensure the right vehicle is quoted and the price is sourced.
Our fleet manager can source the vehicle for you and can also accommodate any
existing relationships you may have with other vehicle dealerships.
Reditus can offer a finance lease or an operating lease option for new and some
used vehicles.
After the package is accepted, the vehicle will be is sourced and delivered to an
agreed location.
All other inclusions to the package as discussed above will be based on the
nominated kilometers.
Reports showing utilisation of the budget and fringe benefits will be made
accessible to the driver on a regular basis.
The package can be changed anytime within the lease term to ensure that it
meets or matches the vehicle operating costs.
Three months before the lease expires, each driver will be notified so that proper
measures can be taken to ensure smooth changeover of the vehicle.
EMPLOYEE HANDBOOK 13
NOVATED PROCESS FLOWCHART
ASSOCIATE MOTOR VEHICLE LEASES
ATO Reference: IT2509
3
1
1. Lease agreement
2. Lease payments from pre-tax
and post-tax salary
3. Company provides motor
vehicle
2
For tax purposes, an associate lease is structured in much the same way as a Novated lease. Only this
time, an associate of the employee (in most cases the spouse or another family member) acts as the
lessor.
The car of the associate will be leased to the employer and made available to its employee as a car
fringe benefit. The use of the car by either the employee or his/her associate is not limited to travels in
the nature of business related kilometers.
The associate lease agreement requires an employee to nominate his/her associate. An associate can
be any of the following:
Spouse
Partner
Relative
Family member over 18 years old
Family Company or Family Trust
EMPLOYEE HANDBOOK14
The income gained by the associate out of the lease payments from the associated lease
agreement will be taxable and must be declared in the associate’s income tax return at
the end of the financial year. However, by deducting all operating cost related to the use
of the vehicle, the associate will be able to offset any income earned. (see below).
Lease payments are determined independent of the relationship of the employee and his/
her associate and will be paid from the employee’s salary package.
PROCEDURES IN IMPLEMENTING AN ASSOCIATED LEASE:
The associate will provide details of the fixed costs associated with running the
vehicle
Registration and insurance
Roadside assistance/motor vehicle club membership
Maintenance and service
An estimated number of kilometers expected to driven per year will be required. It will be
the basis of computing for the rate of FBT and the projected fuel cost for the year.
The associate will be required to register for an ABN. Reditus Group can facilitate the
application process or the associate may directly apply online at www.abr.gov. au
Other necessary information needed from the associate will include your full name, date
of birth, and tax file number
DEDUCTIONS
All expenses related with operating the vehicle can be reimbursed by the associate.
Proper documentation (such as tax receipts) to support the claim must be kept and filed:
Fuel Maintenance and servicing costs
Depreciation Registration and Insurance
Roadside assistance Car wash
EMPLOYEE HANDBOOK 15
Tax concessions of about 50% on household expenses and travels of employees living
and working in remote areas of Australia are allowed under The Fringe Benefits Tax
Assessment Act 1986.
By definition, an employee is considered to be living in a remote area when his place of
residence is located at least 40 kilometres from a town with a census population (1981
census) between 14,000 and 130,000 or at least 100 kilometers from a town with a census
population of more than 130,000 or more.*
RENT PAYMENT
50% of the rental costs of an employee living in a rented house can be reimbursed free
of tax from his salary. For instance, you currently pay $400 per week on rent. You can
reimburse as much as $200 per week tax-free. This result to paying less income tax and
receiving a higher net take home pay.
A copy of the rental agreement or a letter from the landlord/real estate agent stating the
amount of rent payable is required for reimbursement.
MORTGAGE INTEREST
50% of mortgage interest for a house owned in a designated remote area can be
reimbursed tax-free from salary.
For example, if your July–December mortgage interest amounts to $8,000, you are
entitled to a $4,000 reimbursement from your pre-tax income. If the interest payment
is spread over six months, a total of $667 per month can be reimbursed free of tax from
salary.
Note: This benefit can only be paid after actual interest charges have been incurred. A
bank statement showing the amount of loan interest paid over a given period will be the
required document prior to reimbursement.
REMOTE AREA ALLOWANCES
* Calculations subject to change by ATO
EMPLOYEE HANDBOOK16
HOUSEHOLD FUEL
Expenditure on gas and electricity expenses in a dwelling within a remote area can also
be eligible for a 50% tax concession.
Bills must be paid first prior to reimbursement. A refund will be incorporated in the next
salary. A copy of the relevant tax invoice and proof of payment is required for the refund.
TRAVEL EXPENSES
Airline travel or road travel related expenses to and from a remote area and the capital
city of the state is allowed for 50% reimbursement. This benefit is available to the
employee and his family members.
Travel must not be less than three days and considered as an annual leave. Documentary
requirements to be submitted are as follows:
Travel declaration
Tax invoice showing proof of payment of airline tickets
Receipts for fuel and other expenses such as meals for road
travels
REMOTE AREA ALLOWANCES
EMPLOYEE HANDBOOK 17
LIVIING AWAY FROM HOME ALLOWANCE
An employee will be eligible to receive a tax-free Living Away From Home Allowance (LAFHA) in cases
where their work requires them to transfer and live away from their permanent place of residence.
LAFHA can be paid as a benefit for up to a period of 12 months.
OFFSHORE EMPLOYEES
A number of benefits are available to employees who are posted overseas – whether from Australia to
a foreign country or from a foreign country to Australia.
These benefits only apply to persons under PAYG withholding
– the employee must be taxed as an Australian resident or income
is paid from Australia even while working offshore.
Benfefits may include:
• Education of dependents
• Language
• Relocation costs
• Travel
LAFHA has two components:
1. LAFHA RENT
100% of the rent expense of an employee at his new location can be reimbursed from
his pre-tax salary.
A copy of the rental agreement will be required for validation purposes.
2. LAFHA FOOD
A food allowance will be provided based on the statutory amounts set by the
Australian Taxation Office in April of each year. The number of family members (adults and
children under 12 years of age) is included in the calculation.
EMPLOYEE HANDBOOK18
For many professions and careers such as tradesmen, engineers, medical practitioners,
education professionals, acquiring and maintaining sets of tools, apparatus and
specialised equipment is an indispensable component in the practice of their profession.
EXEMPT BENEFITS
TOOLS OF TRADE
Such items are reimbursable against an employee’s
income tax in July of each year. Conversely, these
items can also be obtained out of an employee’s salary
package as an expense to be reimbursed from their
pre-tax salary under the otherwise deductible rule.
HOW DOES IT WORK?
An employee can buy in advance his trade tools charged against his own personal account. The
tools procured must be required for work and must have the approval and recommendation of the
employer.
Documentation for the purchase such as full listing of the tools purchased and
the tax invoice must be provided to Reditus together with a completed expense
benefit reimbursement form so that the amount will be deducted from the
succeeding payroll.
INCOME PROTECTION INSURANCE
Premiums for income protection insurance can be included as an exempt item under the
otherwise deductible rule.
EMPLOYEE HANDBOOK 19
PROFESSIONAL MEMBERSHIPS
All professional memberships are FBT exempt. These would include: CPA, Law Society,
AIM, AICD, Engineers Association, other employer associations and Trade Union
memberships.
Note: sporting, gym and other social or lifestyle club memberships do not carry this
exemption.
SUPERANNUATION
A maximum of 15% contributions tax will only be allowed for additional contributions to
an employee’s superannuation made from his pre-tax salary. Reditus Group will be able to
present an assessment on the impact of any additional contributions to
the salary package.
EMPLOYEE HANDBOOK20
SELF-EDUCATION EXPENSES
Tuition fees of employees pursuing undergraduate or post graduate courses in
universities and higher learning institutions can be included in a salary package to be
deducted from their pre-tax salary with prior approval from their department head.
INVESTMENT LOANS AND PROPERTY MAINTENANCE COSTS
Interest payments on property or share investment loans can be included as part of a
salary packaging arrangement deductible from an employee’s pre-tax salary. It will be
limited to the interest payments only.
AIRLINE CLUB MEMBERSHIPS
Charges collected for membership in airline clubs such as Qantas Club, Virgin Blue’s ‘The
Lounge’and such other guilds are exempt from FBT and are considered as an allowable
benefit to employees.
EMPLOYEE HANDBOOK 21
Reditus (n) (Latin);return / income / revenue / reward
07 3054 1000
info@reditus.com.au
www.reditus.com.au
07 3054 1099
Level 2 50 McDougall Street Milton, QLD 4064