Here’s how it works for Vanessa.
Vanessa is an administration assistant, earning $45,000 a year with a student HELP debt. As Vanessa works for a not for profit organisation, she can package up to $15,900 for living expenses. Vanessa’s Reportable Fringe Benefit Amount takes her income above the threshold and means she has to start making HELP repayments of $2,364 a year.
This payment is covered by the tax saving that Vanessa makes by salary packaging (i.e. $4,419), meaning she is effectively paying off her student HELP debt with money she would otherwise be paying to the Australian Tax Office as tax.
So by salary packaging the full $15,900 towards living expenses, Vanessa reduces her taxable income, starts to pay off her HELP debt and still increases her take-home pay by $2,055.
Here’s a breakdown:
|
Without Salary Packaging |
With Salary Packaging |
|
| Vanessa’s Gross Salary |
45,000 |
45,000 |
| Pre-tax living expenses |
15,900 |
|
| Tax and Medicare |
(7,072) |
(2,653) |
| Student HELP debt repayment |
0 |
(2,364) |
| Living expenses |
15,900 |
0 |
| Take home pay |
24,083 |
|
|
Difference in take home pay |
0 |
2,055 |
| Total tax savings |
0 |
4,419 |
Vanessa starts to pay off her HELP debt AND increases her take-home pay by $2,055.