Can anyone explain salary packaging?

[coloradoclan]

Hi everyone! I love this board, and I read it almost daily, but haven't chimed in for quite a while.

Here's a quick update: I accepted a nursing job in Melbourne in mid-December with the nomination approval coming a few days later. Our 457 visa was submitted on-line in early January. We got our notice to get medicals done in early February, which we just got last week. Unfortunately, it has now been over 3 months wait time on news of my nursing registration. I e-mailed them for an update, and all they could say was that it hadn't been assessed yet. The visa case officer said that as long as we got the nursing registration and everything is okay with the medical results, then there shouldn't be any other hold-up on the visa being approved, which I am thrilled about because my husband can't apply for work until that is approved. Our plan was to be able to move in early June.

My question is about salary packaging. The hospital that is sponsoring me sent me an employee package a few weeks ago that talked just briefly about this. Can someone please explain it to me? Does it make a big difference? Can I pay for almost all basic living expenses right out of my paycheck before being taxed?

Thanks everyone!

[amaslam]

Hi there:

Salary packaging basically means to "package" some of your expenses (in accordance with tax rules) so the payment comes out of your pre-tax salary and therefore reduces your taxable income.

As a former 457 the big one here is your rental expenses. On any PR visa you cannot package your rent or housing expenses. However on a 457 since you are considered a 'temporary' resident of AU you can package your rent pre-tax. This will lead to substantial reductions in your taxable income.

Other items you can typically package:
1) Superannuation + any additional contributions you make
2) Medical Insurance premiums (the monthly cost)
3) Some work-related expenses, i.e. as a nurse you should be able to package your nurses uniforms, ask your employer about this aspect.

In the past it was possible to package a car loan into your salary, but I think recent changes to tax law has made this impossible (ask your company about something called novated lease)

You should also find out if you are going to get a LAFHA (Living Away from Home Allowance). This is some basic extra payment made to your for your groceries, this is usually based on the size of your family. As a single it wasn't much, but a colleague of mine with 2 kids got quite a bit more. I was given this as long as I was a 457 holder.

Note, if you become a PR those pre-tax perks (LAHFA and rental packaging) end immediately upon grant of your PR. So you need to keep your HR dept. informed if you do become a PR. Otherwise the ATO will pay you extra special attention (not the kind of attention you want).

Originally Posted by coloradoclan

Hi everyone! I love this board, and I read it almost daily, but haven't chimed in for quite a while.

Here's a quick update: I accepted a nursing job in Melbourne in mid-December with the nomination approval coming a few days later. Our 457 visa was submitted on-line in early January. We got our notice to get medicals done in early February, which we just got last week. Unfortunately, it has now been over 3 months wait time on news of my nursing registration. I e-mailed them for an update, and all they could say was that it hadn't been assessed yet. The visa case officer said that as long as we got the nursing registration and everything is okay with the medical results, then there shouldn't be any other hold-up on the visa being approved, which I am thrilled about because my husband can't apply for work until that is approved. Our plan was to be able to move in early June.

My question is about salary packaging. The hospital that is sponsoring me sent me an employee package a few weeks ago that talked just briefly about this. Can someone please explain it to me? Does it make a big difference? Can I pay for almost all basic living expenses right out of my paycheck before being taxed?

Thanks everyone!

[coloradoclan]

Thank you for the information amaslam! That helps. After reading your reply, I contacted my future employer about the LAFHA benefits, which unfortunately they do not have. Oh well, I'll utilize the salary packaging as best I can.