In Australia, some employers offer an option to salary sacrifice a car purchase. The cost of the car is taken from your pre-tax salary, so your gross income will be less, and therefore, your income tax would be less as well.

However, I read around and saw that items bought using salary sacrifice will have the Fringe Benefits Tax, which, if I understand correctly, is a separate 20% tax for the value of purchases made using salary sacrifice multiplied by a premium.

This is essentially a two-part question :

  1. Did I understand salary sacrificing and the fringe benefits tax correctly?
  2. Should I or should I not salary sacrifice my car purchase?
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    Mark, I know you didn't end up getting an answer here, but did you end up working out the answer elsewhere? If so, would be great if you can answer/accept this yourself! – Tim Malone Jun 5 '16 at 9:57
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    This seems to be a good explanation ato.gov.au/General/Fringe-benefits-tax-(FBT)/In-detail/… – kweinert Aug 31 '16 at 19:49
  • I am aware that Charities are tax advantaged when it comes to FBT on motor vehicles, but I don't understand the rules enough to answer especially around salary sacrifice. Curious if there is an answer. – paulzag Sep 7 '16 at 14:34
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    It is likely that you are not getting an answer here because you have not provided enough information. Without knowing what your effective tax rate is, it is not possible to give an honest answer. If your effective tax rate is greater than 20%, then the salary sacrifice would represent a savings. If your effective tax rate is less then 20%, then it would not make sense. – Anthony McCloskey Sep 17 '16 at 1:51
  • Major considerations for many is that reducing your Salary may also reduce your Super contributions (whether or not it should), and any future severance package. Mind also how this will affect any "benefits" subject to an income test. Consider what happens when you leave the job. Rules change. A short while ago it was possible to Salary Sacrifice multiple novated car leases, including for use of family members, and high mileage was treated favourably. The stroke of a pen. – mckenzm Feb 13 '17 at 19:05

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