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It’s that time of year again, tax time! If you’re looking at maximising your tax return, then one of the strategies that could make a big difference is salary sacrificing.

Salary sacrificing is an arrangement where an employer agrees to forfeit part of an employee’s future gross salary in return for a benefit.  The real benefits of carefully co-ordinated salary sacrifices are when it pushes you into a lower income tax bracket, which means you pay less tax. This is especially useful for those in a very high income tax bracket.

There are three main benefits you need to know about:

• Fringe Benefits - this can include cars, property and expense payments like school fees. These all reduce income tax but does attract a Fringe Benefit Tax (FBT).
• Exempt Benefits - assets used within the business, such as portable electronic devices, computer software, protective clothing, briefcases and tools. These do not attract FBT.
• Superannuation - this is probably the most common form of salary sacrificing. Contributions by an employee into a superannuation fund are not a fringe benefit, so do not attract FBT.  

A few things to know:

• Salary sacrificing cannot be backdated, so at the end of the financial year in June 2011, you can sacrifice from your June salary only.
• Once you have entered into a salary sacrificing arrangement for an expense such as in iPad, you cannot  also claim the iPad as a tax deduction.
• Salary sacrificing can be a smart way to save on tax, but won’t suit everyone’s situation, so speak to a certified financial planner and a registered tax accountant first.  

If you are interested in exploring salary sacrificing options, The ATO website has a useful section, and also see MoneySmart's Superannuation Calendar

Want more information? Then check out the current Winter Edition of Latte Magazine for the full story on Salary Sacrificing, including in depth information, tips and examples!

Haven’t got a copy? Sign up as a Premium or Corporate member, Latte is one of the many benefits.

Heather Smith is a speaker, writer and small business consultant specializing in MYOB and XERO accounting software.