Question

	No Salary Sacrifice	Salary Sacrifice
Package Value
Value of Benefits Provided	-	49700
FBT Payable by Employer	-	22806
= Salary Sacrifice Amount	-	72506
Package Value less Sal. Sac. Amount = Assessable Income	150000	77494
less Income Tax Payable	42997	16732
less Medicare Payable	3000	1550
less Tax Offsets		1080
= After tax pay	104003	58131

Is this agreement beneficial to the employee? Why?

Answer 1

Step 1 Introduction:

Salary sacrificing refers to an agreement between the parties of employment namely the employer and the employee. In this arrangement, the employee agrees to provide part of his salary to claim extra benefits from the employee.

Step 2 Explanation:

Sacrificing salary would be beneficial to the employee.

In the above case, the employee is liable to pay less income tax if he sacrifices his salary and claims the benefits. He is liable to pay less than half of the taxes if he chooses to sacrifice his salary. Also, the portion of income which he enjoys is more than the portion of income left when he does not sacrifice his salary.

Income when the salary is sacrificed
After tax pay	$58,131
Benefits claimed	$72,506
Total income	$130,637

On the other hand, if the employee chooses not to sacrifice his salary, then he is liable to pay higher income tax on the income. His after tax pay income is also just $104,003, which is $26,634 less than the amount if he sacrifices his salary.

Overall, sacrificing salary would be a better option so as to have reduction in tax liability and to have larger portion of income to be left.

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