If you or your employees work in a remote area, there are a number of tax incentives that may be available.
Benefits that can be packaged include:
- 100% of your mortgage interest for the residence you live in as well as only half the amount you package attracting Fringe Benefits Tax (FBT).
- 50% of the rent you pay for the residence you live in.
- 50% of the utility bills for the residence you live in.
- 50% of your holiday transport from the remote area.
What does this mean in real terms?
I am going to present two scenarios, one involving a mortgage and the other with a person renting. I have assumed that the employee earns $85,000 which implies a marginal tax rate of 32.5%. If you earn up to $180,000, the marginal tax rate is 37%, so you will save an additional 5%.
|Home loan of $300,000||$15,000||-|
|Rental on property of $300,000||-||$16,500|
|Net FBT payable||$4,473||-|
|GST savings on utilities||$171||$171|
For someone earning over $100,000 and up to $180,000 the savings are $2,100 per year, primarily due to the higher marginal tax rate of 37%. Pay@bility can assist you to navigate the benefits of salary packaging remote area benefits.
What is defined as a remote area
There is a distinction made between areas that are either within or outside of Zones A and B. An area will generally be regarded as remote if it meets the following parameters:
Within Zones A and B
- At least 40km from an urban centre with a population of 28,000 to less than 130,000 (as per the 1981 census).
- More than 100km from an eligible urban centre with a population of 130,000 or more.
Outside Zones A and B
- At least 40km from an urban centre with a population of 14,000 to less than 130,000 (as per the 1981 census).
- More than 100km from an eligible urban Centre with a population of 130,000 or more.
In measuring distances, the shortest possible and practical surface route is taken. If the shortest route includes a trip over water, that component is doubled.
What are the urban centres in Western Australia?
There are five eligible urban areas in Western Australia:
- Perth — the remote area needs to be at least 100km away from the city.
- Albany, Bunbury, Geraldton and Rockingham — the remote area needs to be at least 40km away from these centres.
Employees who work in a remote area (apart from temporary absences) are allowed to package the cost of holiday transport for themselves and their immediate family. The holiday must be three days or more and occur during a period of recreational leave for the employee. When the holiday is over, the employee is required to return to work in the remote area.
Points for compliance
As with all benefits provided, there are a number of compliance issues with providing remote area benefits. These include, but are not limited to:
- For mortgage interest, payments must be made directly to the mortgage account and not an offset account.
- For rental, the payment must be made to the rental agent to meet the requirements of an expense payment fringe benefit.
- Employers are expected to provide remote area housing in the remote area.
Benefit@bility, a division of Pay@bility, can help you navigate the world of benefits and the Australian Tax Office has more information on Fringe Benefit Tax for remote areas.
Pay@bility provides benefit administration services and was founded to deliver Australia’s first employee self-service model for salary packaging.