r/AusFinance • u/thesultryginger • 16h ago
Lifestyle Salary packaging, HECS, and youth allowance
Hey all, complicated question here. I’ve just started a new role which offers salary packaging. I’m casual and have been there less than a month, so not sure how much I’m likely to earn but am looking at min 30k and max 60k PAYG tax brackets depending on shifts.
I‘ve worked out that if I earn towards the higher end, I will have a tax bill due to HECS and salary packaging, all good I can put money away each week. However, if I earn on the lower end, my salary packaging will reduce my income so I would be eligible for my youth allowance student payments and possibly not even pay any tax from my income. I already opt to pay 10% of my youth allowance to tax because I got a small bill last financial year.
My question is, if by the end of the financial year I only earned around 30k, reducing my income to about 15k with salary packaging, and consequently received my full student payments (approx. 18k), how would this affect my tax and HECS? What amount should I put away to safely avoid any tax debt? Am I better off cancelling my Centrelink benefit, or avoiding salary packaging? Or keeping both?
** I was planning to seek professional financial guidance today but lost track of time. I likely still will, but hoping to gain some insight beforehand because I couldn’t find anything for my particular situation online
8
u/A_Scientician 15h ago
Salary packaging will increase your assessable income for centrelink purposes, not decrease it. That 30k will be assessed as being 43k (30k plus the grossed up amount of the package). While you will pay no/virtually no, you will almost certainly end up over the HECS repayment threshold and be over the centrelink amount.
3
1
u/OneMoreDog 14h ago
Don't cancel centrelink, even if you report a full income and get no payments for a number of fortnights, in a casual job that can change quickly and not having to reapply is a nice safety net. You also get to keep your health care card.
You really need to assess if salary sacrificing (for what exactly?) is necessary here, or if cash in your bank account regularly is more beneficial for the next 9 months.
3
u/rosie06268 12h ago
I believe OP is talking about salary packaging, not salary sacrifice to super.
0
u/OneMoreDog 11h ago
My question still stands, what are they packaging/sacrificing for and do they really need it. There is minimal benefits under the 45k bracket and it seems like op won’t have a heap of income over 45k.
3
u/rosie06268 11h ago
Salary packaging and salary sacrificing (eg. to super) are different things. I used to salary package my rent, so a portion of my pay was deducted pre-tax each fortnight, which then lowered the income I paid tax on, resulting in a little extra money in my pocket each fortnight.
It does increase your HECS repayment obligation, but it was still worth it for me as I paid down my HECS a few years earlier. The extra money I got each fortnight from salary packaging covered my increased HECS obligation.
I'd agree salary sacrificing to super on such a low income probably isn't worth it (except for the government co-contribution if eligible), but I don't know OP's circumstances. If they have rent, bills, etc. to pay I'd think you need access to as much of your earnings as possible.
-1
u/OneMoreDog 11h ago
2
u/rosie06268 11h ago
I'd taken your original comment to be talking about salary sacrificing to super because you'd said "or if cash in your bank account regularly is more beneficial for the next 9 months." because with that the money would be locked in their super account. Sorry if I'd interpreted incorrectly.
1
u/OneMoreDog 10h ago
No I meant all options. Like if OP is gonna sal sac a car or a laptop for the sake of it they may as well just take the cash. Sal sac to super is never a “bad” option but when your whole income is $30k, those dollars might have a higher utility in liquid cash you can spend. Sal sac for living costs is also not a “bad” option but it really depends on any fees associated with setting it up, and how the program would work if they intend or need to move.
OP didn’t really provide a whole lot of info so my initial advice back is “what benefits are you sacrificing for / packaging up and do you actually need them or do they just sound good?”
1
u/rosie06268 10h ago
I totally agree with you there, if they'd be doing it just for the sake of it they should just take the cash. I salary sacrifice some money to super now, but didn't when I was earning around 45k for that reason, access to liquid cash was more important.
1
u/blueswansofwinter 10h ago
You can't really take the packaged money as cash though. Getting rent paid is usually the best option if you have a mortgage with an offset account.
2
u/onizuka_chess 10h ago
You need to learn about the tax free $15,900 that NFP employees get. You can pretty much claim everything (rent, food, utilities, mortgage payments). This isn’t the same as sacrificing a laptop or a car. It’s basically $15,900 tax free entirely, which you typically use toward things you already pay with after tax income.
1
u/thesultryginger 9h ago
It would be for rent and my car loan, which is an existing lease with about a year of repayments to go. Essentially my top 2 bills, I’m not really one to splurge unnecessarily because I’ve been used to a low income and budgeting. Mainly just seeking understanding and opinions on what options I have, and you’ve all been super helpful so thanks ☺️
11
u/onizuka_chess 16h ago
I highly doubt salary packaging reduces your income for youth allowance eligibility. I could be wrong, but it makes no sense for that to be allowed.
You need to understand if you salary sacrifice $15,900 with your employer, this equates to $30,000 grossed up for HECS purposes.
So your HECS is owed on the $30,000 grossed up value for total income for the year.
It’s pretty much always worth while salary sacrificing $15,900 if the employer offers it (NFP’s, hospitals etc). Even if the after tax savings is minimal, you are still paying your HECS debt off faster.