FBT and Super Changes to Increase Base Salaries?

Changes to the taxation of salary-sacrificed motor vehicles proposed by the current Labor Government are likely to further impact the take-home pay of some senior management and senior professional staff.

Coming soon after changes to the fringe benefits tax treatment of living-away-from-home allowances (LAFHA) last October, it will be interesting to see whether senior management and executives will now proactively demand additional salary to compensate for the impact of any changes on the level of their fixed remuneration (which includes benefits).

The recent increase (and further anticipated increases) to the superannuation guarantee charge rate (to 9.25%) will no doubt contribute to senior management’s attention on fixed remuneration adjustments and the extent to which these changes will be either accommodated or absorbed by their employer.

The possible impact of the changes raises questions for organisations:

  • If the proposed tax changes are implemented, should costs be absorbed by the employee?
  • Is the employee’s current total fixed remuneration based on an agreed level of base salary and benefits or is it inclusive of salary and the total employer’s cost of providing benefits?

We will consider such issues further in the next Newsletter.

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