Did you Know you can salary sacrifice your rental property expenses and save?23-Apr-2014
Many employees may have a residential rental property and most of them would pay for the expenses relating to those properties with their after-tax income.
By salary sacrificing those expenses the employee could make significant savings. (i.e. by getting their employer to pay or reimburse the expenses, and having the employer deduct any such payments or reimbursements from their before-tax income).
For example, by salary packaging certain rental property expenses, employees may effectively avoid paying the GST on the expenses.
In particular, if an employee is entitled to claim an immediate 100% deduction for an expense they incurred in relation to a rental property, they can achieve significant after-tax savings by salary packaging rental property expenses (that are subject to the ‘otherwise deductible’ rule) for the following reasons:
• Where the employer is entitled to an input tax credit in respect of the rental property expense, the
employee effectively salary packages the GST-exclusive cost of the expense and, in effect, avoids
paying GST on the reimbursement;
• The employer may claim a deduction for the GST-exclusive cost of the expense, and the employer
reimbursement or payment will not be subject to FBT as its taxable value will be reduced to nil
under the ‘otherwise deductible’ rule; and
• Where the employer has reimbursed or paid for the cost of acquiring rental property depreciating
assets that qualify as a ‘once-only’ deduction, the employee may ‘doubledip’ by claiming an outright
deduction (in the year of purchase) for the GST-inclusive cost of the asset, under the $300
immediate write-off for non-business assets.
For further information or assistance on this matter please contact the team at Simeoni.