Salary Sacrifice

[dbrooker]

Hi all

I work for a small NFP that has salary sacrifice component to its employee package, a different system to what I have been used to (my previous organization was larger and they paid the tax free component onto a debit card).

Two employee situations: employee 1 - has resigned and left last week, they asked for the sacrifice to be applied to their holiday pay, and employee 2 - is on paid parental leave (Centrelink) and has asked can they have the sacrifice applied to those payments. There are obvious benefits to the employees but tax implications for the employer.

My view was that employee 1 isn't and employee 2 is based on the fact that employee 2 is still an employee and employee 1 isn't. What do the group think?

Des

[Tiger]

I'm not familiar with the weird dealings of NFPs but had something similar asked of me a few months back whereby an employee from a NFP wanted her A/L payout at termination, paid into her super fund! I, perhaps in ignorance, advised employer not to do it.

But honestly, it is all much about tax and I would really recommend you contact the ATO and ask them.
You seriously don't want to mess around with tax and believe me I've seen a big increase in businesses being audited by the tax office and the penalties are jaw dropping. Best to get expert advice but if you are wary of calling the ATO then talk to a tax expert who knows this stuff- that way you are protecting yourself.

One thing puzzles me though and that's the employee on P/L - they are on unpaid leave from your employ so if you pay them this 'sacrifice' (unclear what it's for?) then they then become active on your pay system, you'll have to pay the SGC on the 'sacrifice' amount(presumably? since is income) but that's not paid on the Centrelink payment and then you have to worry about a percentage of leave accruing because they are active on the payroll again. Personally that all sounds like a nightmare.

I'm curious about this one - hope you sort it out

Tiger

[dbrooker]

Thanks Tiger. We did talk to the ATO in the end (our IR advisers were much help), the upshot being the ex-employee wasn't entitled to any sacrifice but the employee on the Federal parental leave couldn't use the payment retrospectively for sacrifice (for a variety of reasons the employee nor employer hadn't registered with Centrelink) but could from future payments.