How does Single Touch Payroll Phase 2 affect salary packaging?

In particular, the concern relates to how salary packaging arrangements might impact various means tested government levies and allowances – such as Family Assistance and Child Support Payments.

Under STP2, employers are required to report employees’ gross salaries, as well as any salary sacrifice amount, with the net of these being the payment that is subject to PAYG withholding and assessable to the employee. 

Separately, employers are also required to report the employees’ Reportable Fringe Benefits Amounts (RFBA). It is these RFBA amounts that are used in the means tests for Family Assistance, Child Support, HECS repayments, etc. The salary sacrifice amount reported has no impact on these means tests. 

This issue is particularly relevant where a salary packaging arrangement is entered into for a benefit that results in no RFBA (for example a remote area housing/rent benefit, car parking, or an exempt benefit provided to a religious practitioner). In these situations, the RFBA amount is correctly reported as nil and the salary sacrifice amount reported has no impact on the employee’s total income used in the means tests.

In a similar vein, whilst certain electric vehicles are now exempt from FBT, they will typically still result in a RFBA for the employee. In these cases, the salary sacrifice (being for the car’s running costs) will usually not match the RFBA (being based on the car benefit taxable value). It is the RFBA that is relevant to the various means tests for government levies and allowances.

For more information, please contact Elizabeth Lucas.