Salary Packaging

In Australia all directors and employees can enter into an arrangement with their employer such that expenses that would otherwise be paid by the employee are paid or reimbursed by the employer.

This is called “salary packaging”, and the primary reason is tax mitigation.

There are a number of costs that can be salary packaged and made available to employer sponsored visaholders – particularly 457 visaholders – including:

  • The costs of relocating the sponsored employee from overseas to Australia, including the transportation of household effects to Australia from the home country of the visa holder.
  • Leasing of household equipment and furniture.
  • The education costs inAustraliaof the sponsored employee’s children up to the age of 25 (an overseas student fee is payable when attending a Government school in certain States and Territories of Australia).
  • Connection of home utilities and telephone lines.
  • Once a year air tickets for the sponsored employee and accompanying family to the home location while the sponsored visaholder is living and working in Australia.
  • Where an employee maintains a residence in Australia, the Living Away From Home Allowance, or LAFHA. Most commonly this takes the form of an employer agreeing to meet the costs of a sponsored employee’s rented accommodation. So long as appropriate steps are taken to satisfy the Australian Taxation Office the LAFHA becomes in effect a tax free component of the salary package.

For salary packaging to be tax effective it is critical that the package is considered before the sponsored employee applies for the visa, particularly as the above costs cannot be claimed as a tax deduction by the employee on his/her Australian tax return after they have been paid by the employee and have not been reimbursed under a salary packaging arrangement.

With our knowledge of tax and employer sponsored visas the team at GM Corporate is ideally placed to discuss salary packaging with employers and intended employees to ensure the overall financial package is tax efficient and secures the desired visa outcome.

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