SALARY SACRIFICING

In reply to the Hon. J.A. DARLEY (8 March 2011) (First Session).

The Hon. R.P. WORTLEY (Minister for Industrial Relations, Minister for State/Local Government Relations): I have been provided the following information:

The reasons for the differences in what can be salary sacrificed by public servants depending on which department they are employed with lie in the application of Federal taxation provisions.

All salary sacrifice arrangements, including SA Government Salary Sacrifice Arrangements (SAGSSA), must comply with the Federal Government Fringe Benefits Tax Administration Act (FBTAA), and Australian Taxation Office (ATO) rulings and guidelines.

When an employee chooses to salary sacrifice under SAGSSA, they select expenditure items from a list of SAGSSA approved benefits to enact their arrangement. This list includes some benefits that incur Fringe Benefits Tax (FBT) liability, including novated car leases, mortgage or rental payments, household utility bills and credit card payments, and others, such as superannuation contributions, which attract no FBT.

If an employee works predominantly for the Ambulance Service, exclusively in, or in connection with a public hospital, or Public Benevolent Institution (PBI) of which the Legal Services Commission is only South Australian public sector example, that employee may access a capped FBT exemption under Section 57A of the FBTAA. This means they may salary sacrifice benefits which, subject to a cap, would otherwise incur FBT, such as those listed above.

Effectively, other employees, who are not eligible for the exemption, cannot salary sacrifice these same benefits as to do so would incur a prohibitive FBT liability.

While all employees incur Fringe Benefits Tax for novated car leases, such a lease may be financially attractive to an individual, subject to car usage and other factors. FBT exempt items, such as superannuation, may be accessed equally by all employees.

In each case, the choice and the responsibility to salary sacrifice remains that of the employee, all of whom are strongly recommended to seek independent financial advice before undertaking salary sacrifice.