Salary Sacrifice Employee Rent

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  • Updated 3 months ago
How do I set up Salary Sacrifice for employee to pay his rent?
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Danelle McLean

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Posted 3 months ago

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Kevin Russell, Accredited Partner

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How does anyone salary sacrifice to pay rent? I wasn't aware it's a legitimate fringe benefit unless you are a PBI or charity or Clergy

You could start here:

https://help.reckon.com/article/b4v97we13z-kba-5377-setting-up-a-non-super-salary-sacrifice-item-for-a-salary-package

And here: 

https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/In-detail/Employees/Salary-sacrifice-arrangements-for-employees/

(Edited)
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Bruce

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There is no legal impediment for an employer from paying rent on behalf of an employee.   However in most cases it does not make any sense because:
- it usually attracts FBT, meaning that the employer pays tax on the rent at a rate equivalent to the top personal marginal tax rate.   If salary packaging then this will often have a negative impact on the employee.    So, as implied by Kevin, why bother?
- the administration of FBT, from a Company's viewpoint, if often just not worth the time and cost associated with it.   Again, why bother?

In relation to the link supplied by Kevin - it shows as a "legacy" knowledge base item. Presumably this is because it implies that salary sacrificing can be used to reduce a Company's superannuation guarantee obligations.  This of course is no longer the case - salary sacrificing cannot be used to reduce a Company's superannuation guarantee obligations. 

Whatever you do, take a lot of care.

One other thing, only Tax Agents can advise on FBT.   Bookkeepers/BAS Agents cannot do this.
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Kevin Russell, Accredited Partner

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Bruce well that's disappointing that these articles are still showing up. I never advise about FBT especially when it comes to PBI and charities I take my lead from the salary packaging people.
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Bruce

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I'm with you - I don't advise on FBT either.  On occasions this annoys clients, as they  (often correctly) think that I know the answer, but it is just not worth the professional risk to me. 
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Danelle McLean

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Hi all
thank you for response.
I have checked with my boss and as we are a non profit organisation we are exempt from FBT up to about $17k pa per employee - with a full rebate of up to $30k
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Kevin Russell, Accredited Partner

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I did some work for the first Medicare local in Australia right here in Geelong. They have PBI status so they are able to salary package up to 30k as well. As I mentioned I took advice from the agency which administered the salary packaging.
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John Graetz

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Hi Danielle.  As alluded to by Kevin and Bruce, you are really delving into dangerous ground here and rather than you asking this question in this forum, you should be referring this to your Accountant.  You have used the term "not for profit organisation" as being exempt, but this is not strictly correct unless it is a PBI or a hospital etc - refer to this article from the ATO:
https://www.ato.gov.au/Non-profit/Your-workers/Your-obligations-to-workers-and-independent-contractors/Fringe-benefits-tax/FBT-concessions/FBT-exemption/
Apart from this issue, you also need to set up a proper Salary Sacrifice Agreement, which probably you need you Accountant to assist you with as well.
Bruce has correctly pointed out the difficulties with administering this at an employer level, hence the reason, in my experience, is that employers will detour their staff to a salary packaging company to handle this.
John L G