Many employees may have a residential rental property (or even a portfolio of such properties). Most of them would pay for the expenses relating to those properties out of their after-tax income.

However, by salary sacrificing those expenses (i.e., by getting their employer to pay, or reimburse them, for the expenses, and having the employer deduct any such payments or reimbusements from their before – tax income), the employee could make significant savings. For example, by salary packaging certain rental property expenses, employees may effectively avoid paying the GST on the expenses.

• Where the employer is entitled to the input tax credit (GST) in respect of the rental property expense (mainly on commercial residential, etc)  the employee effectively salary packages the GST-exclusive cost of the expense and, in effect, avoids paying GST on the reimbursement.

• The employer can claim the GST, and deduction for the GST­ exclusive cost of the expense, and the payment from the employer to the empolyee to reimbursement or payment payment directly will not be subject to FBT as its taxable value will be reduced to nil under the ‘otherwise deductable’ rule.

Umbrella Accountants – Property Accountants Brisbane