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Edited version of your private ruling
Authorisation Number: 1012305303366
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Ruling
Subject: Salary sacrifice agreement
Questions:
1. Is the amount paid on your behalf by your employer under an effective salary sacrifice agreement included in your assessable income?
Answer:
No.
2. Are you liable for fringe benefits tax (FBT) on the salary sacrifice amount?
Answer:
No.
3. Does section 23L of the Income Tax Assessment Act 1997 (ITAA 1936) apply to the salary sacrifice agreement?
Answer:
Yes.
This ruling applies for the following period
Year ended 30 June 2011
Year ended 30 June 2012
The scheme commenced on
1 July 2010
Relevant facts
The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:
· your application for private ruling
Under your current workplace agreement, you have entered into an effective salary sacrifice agreement to forego part of your remuneration, which you would have otherwise expected to receive as salary or wages, in return for the employer fulfilling a commitment on your behalf.
Relevant legislative provisions
Income Tax Assessment Act 1997 - Section 23L
Reasons for decision
Taxation Ruling TR 2001/10 discusses salary sacrifice arrangements (SSA) and defines a SSA as being an arrangement whereby an employee contractually agrees with their employer to forego part of their remuneration that they would otherwise receive as salary and wages in return for benefits of a similar value. The assumption being that the employee is then taxed only on the reduced salary or wages and that the employer is liable to pay FBT, if any, on the benefits provided (paragraph 19).
An effective SSA may reduce an employee's salary or wages to below the minimum entitlement under industrial law by providing a benefit in the place of salary or wages. Benefits so provided are exempt income under section 23L of the ITAA 1936 if derived as ordinary or statutory income.
In your case, you have entered into an effective SSA to forego part of your remuneration, which you would have otherwise expected to receive as salary or wages, in return for the employer fulfilling a commitment on your behalf. As discussed above, you are only assessable on the reduced salary and wages.
You are not liable for FBT on the amount forgone; any FBT payable on the agreement will be payable by your employer. The benefits provided to you are exempt income under section 23L of the ITAA 1936.