Child care fees – they’ll take a large bite out of any money you make from returning to work so it makes sense to look for ways to ease the burden!
Salary packaging is when you enter an agreement with your employer for them to give you some form of benefit other than wages. You can actually package pretty much anything you want, but the catch is that these benefits (known as fringe benefits) will be subject to Fringe Benefits Tax which is set at the highest rate of tax, so you won’t actually have any tax saving.
There are some fringe benefits however that are exempt from the tax or have some concession applied. One of these can be child care services, but the hurdle is that to be an exempt benefit, the child care facility has to be located on the employer’s premises. Typically it is only large institutional employers that will have this available, so often it’s just not available.
Under a salary sacrifice agreement for child care services you will also be foregoing your eligibility for Child Care Benefit or Child Care Rebate. There are various means tests for each scheme, but the rebates can be from $7,500 to $10,660 each year, so even if packaging is available you need to work out if the tax savings actually outweigh the lost benefits and rebates.
Have you weighed up the options for yourself, or was it all too much trouble? If you’d like to have somebody you can call on for this and similar financial questions give us a call on (02) 6247 1233 to talk about putting in place your own financial plan today.