Individuals employed in the Not-for-Profit (NFP) sector often seek ways to make a positive impact while facing the financial constraints inherent in their chosen field.
To address this, the Australian Government introduced NFP salary packaging benefits, allowing employees to maximize their earnings while contributing to meaningful causes.
In this article, we delve into the key eligibility criteria for NFP salary packaging, the advantages it offers, and considerations for making the most of this financial incentive.
Salary Packaging Eligibility
Before exploring the intricacies of salary packaging benefits, it is important to understand the eligibility criteria. Individuals employed in the Not-for-Profit sector have the option to incorporate salary packaging into a portion of their earnings.
Not-for-Profit organizations can package up to a maximum of $15,899 annually, with an additional $2,650 allocated for meals and entertainment. This time frame spans from April 1st to March 31st of the subsequent year.
Effectively, this translates to a reduction of an individual’s taxable income by $15,899 per year. For example, an individual earning $100,000 annually would be taxed on $84,101 per year if they choose to package the full $15,899.
It is important to note that this arrangement is applicable per Not-for-Profit employer. For instance I worked for 2 Not-for-Profit employers within the same period, so opted to package the full $15,899 with each company.
However, this may not be a suitable strategy for your situation, so understanding the financial ramifications and seeking independent financial advice is important.
In essence, Salary Packaging serves as a substantial incentive for those in the not-for-profit sector, especially considering the traditionally higher remuneration levels in the For-Profit sector.
Understanding NFP Salary Packaging Benefits
With eligibility clarified, let’s delve into the benefits of NFP Salary Packaging. Not-for-Profit organizations can offer salary packaging benefits to their staff, granting individuals the opportunity to retain a more substantial portion of their earned income.
Employers classified as Public Benevolent Institutions (PBIs) or Health Promotion Charities (HPCs) are authorized by the Australian Taxation Office (ATO) to implement salary packaging benefits.
Explaining the $15,899 Fringe Benefit
For employees in not-for-profit organizations, understanding the $15,899 Fringe Benefit is crucial for optimizing their financial benefits.
This amount, often referred to as the ‘tax-free cap,’ represents the upper limit for salary packaging. Hospital and healthcare employees have a slightly lower cap at $9,010.
When salary packaging for the entire Fringe Benefits Tax (FBT) year, running from April 1 to March 31, the maximum allowable salary packaging is either $611.54 per fortnight or $305.77 per week.
Choosing to package your salary at this maximum amount indicates that you are making the most of your benefits. However, employees also have the flexibility to opt for a lower amount if it better suits their financial preferences.
It’s important to be aware that, in certain situations, strict adherence to the maximum allowed salary packaging may result in deductions exceeding or falling below the specified amounts.
Therefore, individuals should carefully consider their financial circumstances and preferences when deciding on the optimal salary packaging amount.
Meal and Entertainment Card
Beyond the monetary advantages, the perks of NFP salary packaging extend to meal entertainment, thanks to the Meal and Entertainment Card.
The Meal and Entertainment cards are once again accessible to those meeting the criteria mentioned above. This card enables employees to use pre-tax dollars for expenses including food and drink, entertainment, holiday accommodation, and venue hire.
In concrete terms, employees can package $2,650 per annum using the Meal and Entertainment card. This amount can be spent on meals, accommodation, and function hire, offering tangible financial savings.
This legal benefit is not only approved by the ATO, but it comes with rules and reporting requirements that employers and employees must adhere to for access to the associated tax savings.
Where Can I Use My Meal And Entertainment Card
Contrary to common perception, the Meal and Entertainment card is not limited to just dining experiences. It encompasses a diverse range of expenditures, making it a versatile benefit for employees. Apart from meals at cafes, restaurants, or hotels, employees can leverage the card for various purposes.
Venue Hire: The card facilitates expenses related to venue hire, covering events like 21st birthdays or engagements.
Holiday Accommodation: Whether it’s a lavish five-star resort or a serene caravan park, the card caters to holiday accommodation expenses, even extending to that dream ship cruise.
Meals: Dining experiences at cafes, restaurants, or hotels fall under the criteria, allowing employees to savor culinary delights while enjoying the tax benefits.
Food and Beverages at Special Occasions: Special occasions such as weddings and birthdays become more memorable, with the card covering expenses for food and beverages consumed during these events.
Inclusion of Family and Friends: The Meal and Entertainment card embraces a social element, allowing employees to include family and friends in all of the above expenditures.
Exclusions and Rule Adherence: What You Can and Cannot Include
However, as with any tax legislation, adherence to rules is paramount. Some exclusions from the benefits include:
Takeaway Food or Bottle Shop Purchases: Expenses related to takeaway food or bottle shop purchases do not qualify for inclusion.
Regular Groceries: Everyday grocery expenses are excluded from the benefits provided by the Meal and Entertainment card.
Hiring Outside of Meal and Venue Hire: Expenditures related to hiring services outside the realm of meal and venue hire, such as hiring a band or entertainment, are not covered.
Movies or Musicals: Entertainment in the form of movies or musicals is not part of the approved benefits.
Flights to and From Luxury Accommodations: While the card covers holiday accommodation expenses, flights to and from the luxurious five-star resort are not included.
Salary Packaging Benefits Beyond Dollars and Cents
Beyond the financial advantages, NFP salary packaging offers intangible benefits that contribute to job satisfaction and overall well-being.
Employees in the Not-for-Profit sector often choose organizations aligned with their values, and the ability to contribute more significantly without compromising their financial stability enhances their sense of purpose.
Making the Most of NFP Salary Packaging Benefits
NFP salary packaging benefits provide a valuable avenue for individuals in the not-for-profit sector to maximize their financial rewards. From the $15,899 Fringe Benefit to the meal entertainment perks, employees have the opportunity to tailor their benefits to suit their preferences and circumstances.
While navigating the complexities of salary packaging, individuals should be mindful of potential drawbacks and seek professional advice to ensure they are optimizing their financial well-being while contributing to meaningful causes.
The Meal and Entertainment card, with its diverse range of uses, adds a flavorful dimension to these benefits, allowing employees to enjoy both tax savings and an enriched lifestyle.
By understanding the rules and exclusions associated with the card, individuals can make informed choices, making the most of this unique opportunity to enhance their financial well-being.
I’ve reviewed CBB, one of the leading salary packaging providers. Having used their services for several years, I’ve put together a review based on my firsthand experiences.