Using pre-tax salary to pay for day-to-day expenses such as vehicles may reduce the amount of income that contractors have to pay tax on. This will reduce their average tax rate.

Introducing contractors to CXC Global will enhance your relationship even more, and ensure your agency is not liable for costs and risks such as insurance and income tax.

Here are some of the ways that CXC Global’s team of tax and accounting experts can help:

• Fringe benefits: provision of non-salary benefits such as a vehicle
• PAYG with salary packaging
• Salary packaging examples

Some areas to consider for salary packaging of Fringe Benefits, and how CXC Global can structure them to a contractor’s advantage:

Vehicles

• A concessionally-taxed novated lease is a popular way to package a vehicle. This is a three-way agreement between employer, contractor and finance company. During the lease the contractor gets full use of the car for business and private purposes. In general they are highly portable. As with any lease, they’ll have to pay the residual value when the lease runs out.
• Vehicles and their running costs are taxed at a concessional FBT rate. Whether packaging saves money depends on the car’s value, the kilometres a contractor drive each year and their marginal tax rate

• Home office expenses
• Mobile phone costs
• Utility payments and internet charges
• Training/educational courses, seminars
• Travel expenses (domestic and international)
• Books and publications
• Stationery

Exempt benefits
The following are examples of benefits that are exempt from FBT, and can provide a full tax benefit:

• Notebook, laptop computers. Exemption for portable computers limited to purchase of one computer per FBT year
• Mobile phone or car phone primarily for use in employment
• Briefcases
• Airport lounge membership
• Union and professional association fees
• Living away from home allowance (LAHFA)
• Taxi travel
• Relocation for employment
• Flights and car travel associated with relocating for employment
• Sale and purchase costs of property when relocating for employment

Superannuation
While Superannuation is not a fringe benefit as such, in regards to income tax it is tax free and - due to the structure of the superannuation tax system - can provide significant tax benefit.

Contributions paid into a contractor’s fund by your employer, or what is commonly called ‘Salary sacrificed’ super contributions, will be taxed at 15% within their super fund. Recent changes to the taxing of withdrawals from super funds have also provided potential benefits.

The contribution benefit is limited by a concessional contribution cap per year, and individuals should seek their own personal advice as to the suitability of superannuation investment for their situation.

In the 2008-9 year, the concessional contribution cap for people under the age of 50 is $50,000 (indexed). For people over 50 the annual cap is $100,000 (not indexed) until the 2011-12 financial year. The $100,000 cap will be phased out in June 2012, when everyone will move to an indexed version of the $50,000 cap.

> Back to top

Contractors join as a member of CXC Global. We then invoice on their behalf, pay them directly, and manage all the tax, insurance and superannuation liabilities. We also structure their salary in a way that ensures more money in their pocket.

Advantages:

• More cash in their pocket after tax
• Managed cashflow
• No start-up costs
• Salary packaging benefits such as novated vehicle lease and expenses, computer, mobile and equipment packaging, training deductions, subscriptions and membership deductions
• Admin time and costs significantly reduced
• Free personal tax return
• Statutory requirements such as BAS, GST and ABNs taken care of
• Compulsory insurances taken care of and automatically covered
• Free access to tax, accounting and financial planning experts
• No additional audit or accounting fees
• Living away from home allowance (LAFHA)
• Nominated account management personnel
• MyCXC secure login for electronic timesheets, payslips, training, OH&S, Super, tax and contracts
• No director liability
• Wholesale Superannuation fund if contractors do not have their own
• Discounts on travel and training
• ACS membership with training discounts
• No APSI issue, as we have a ruling from the Australian Tax Office that ensures we are compliant

Disadvantages:

• Tax deductible management fee

How CXC Global can help contractors:

• Significantly reduced administration, tax and insurances burden
• Tax effective structure that puts more money in their pocket
• High level of personal service
• Free tax return for the individual
• Free financial advice
• Online reporting of timesheets, payslips and contracts
• No APSI considerations

Overall:
Working through CXC Global offers all the advantages of a Pty Limited, without the onerous admin and paperwork. And our team of accounting and tax experts almost always mean more money in a contractor’s pocket.