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EMPLOYEE HANDBOOK Novated Motor Vehicle Leases Associate Motor Vehicle Leases

LAFHA Remote Area Allowances Exempt Benefits

EMPLOYEE HANDBOOK2

REDITUS

EMPLOYEE

HANDBOOK

3EMPLOYEE HANDBOOK

EMPLOYEE BENEFIT BOOK

W e have prepared a wide range

of benefits matching your

Company’s tax status and objectives

with the best interest of the employees

in mind.

We ensure that these benefits are

constantly reviewed and benchmarked

against “best practices” to reflect a high

standard in the field of salary packaging

and employee benefits. However, the

Company reserves the right to make

appropriate modification to incorporate

changes in taxation and guarantee its

efficient management.

You may structure your package, given

the information and the parameters set

in this Handbook, together with the

assistance that will be given by Reditus

salary packaging consultants.

This Employee Benefit Book is designed to provide comprehensive information to employees interested in the salary packaging offered by your Company. The offer for benefit packaging presented here is available to all employees.

P.14 Associate Motor Vehicle Leases

P.16 Living Away From Home Allowance

P.18 Remote Area Allowances

P.20 Exempt Benefits

P.7 AssessmentProcess

P.9 Novated Motor Vehicle Leases

P.4 Corporate profile

P.5 An overview of salary packaging

CONTENTS

EMPLOYEE HANDBOOK4

CORPORATE PROFILEReditus Group is a financial service consulting firm providing ground-breaking ideas for

your salary packaging and administrative outsourcing needs. Reditus has long made a

mark in the industry for its comprehensive advice and professional service.

FINANCIAL SERVICES

We have par tnered with Austral ia’s

leading independent f inancial planning,

investment, superannuation and

stock brok ing companies so Reditus can

offer you the best f inancial ser vices.

Reditus offers the fol lowing professional

f inancial ser vices:

Financial planning

Investment advice

R isk assurance: Li fe, disabil i ty and

income protection insurance

Group insurance policies

Corporate superannuation plans

Stock brok ing and por tfol io

managment

Mor tgage brok ing and lending

Reditus has established a nationwide

presence through its network of

par tners across Austral ia’s capital

c it ies and regional centers in

order to meet your investment and

f inancial planning needs r ight where

you are.

SALARY PACKAGING

We provide the technical exper tise

in sett ing up your remuneration

structure. I t includes an interactive

discussion about the basic

elements of salar y pack aging, a ful l

explanation of the benefits avai lable,

and real l i fe examples and pack age

strategies.

FLEET SERVICES

We save you the t ime, money, with

our Novated and Associate Leases

and Fleet Management ser vices.

Reditus provides special ist advice

to employees with lease vehicles

options as par t of your salar y

pack aging arrangements.

EMPLOYEE HANDBOOK 5

TRADITIONAL REMUNERATION SALARY OR WAGES

Australian employees have always been

paid following a strict salary or wage basis.

The Australian Industry Awards have always

been resolute on giving minimum level of

cash salary to employees. As a result, a salary

package that offers additional benefits as

well as the cash salary of employees was

never an option. It was only in the late 1980’s

that employer superannuation became a

part of the remuneration package for most

Australians.

WHAT IS SALARY PACKAGING?

Salary packaging is a remuneration structure

allowing an employer to provide tax exempt

or concessionally taxed benefits to their

employees other than cash salary. In this

context, benefit is defined as the payment or

provision of goods, services by an employer in

behalf of its employee.

AN OVERVIEW OF SALARY PACKAGING

Essentially, employees are actively encouraged

to take advantage of the benefits of salary

packaging by the Australian Tax Office and

other government departments, in order to

maximize their after tax income. In fact, ATO

recognizes salary packaging as a legitimate

form of taxation planning. It has now become

an industry best practice as employers and

employees are given greater flexibility in

negotiating for employment packages.

In a general sense, salary packaging allows an

employee to receive non-cash payments as

part of his or her remuneration in the form of

fringe benefits, on top of his cash salary. The

main purpose of this type of compensation

scheme is for an individual to get the most

out of his net remuneration (after tax income).

In deciding to get paid with benefits in place

of monetary income, employees can defer

standard taxation rates by

opting for Fringe Benefits.

EMPLOYEE HANDBOOK6

Tax benefits advantage by reducing

tax payable on their salary thus

maximizing after tax income

A broad range of employee benefit

options that best suits their own

personal or family situation.

SALARY PACKAGING OFFERS EMPLOYEES

WHAT ITEMS CAN I PACKAGE?

In some form or another, salary packaging was already practiced even before the

enactment of the Fringe Benefit Tax legislate in 1986. Any non-cash or fringe

benefits paid to an employee were not subject to tax. It was only when the Federal

government passed a legislation requiring income in all forms to be subject to

taxation were non-cash benefits were subjected to the policy.

HOW DOES IT ALL WORK?

The Reditus Group was engaged to manage the salary packaging process and

supervise payments for your Company. All completed forms will be sent to payroll

which will determine your new remuneration structure consisting of a cash salary

and salary packaged benefits. These salary packaged payments will be paid to

other parties on your behalf.

Once the package is completed and implemented, the you become a client of

Reditus. We will provide you the necessary assistance and support in all matters

concerning your salary package.

All the payroll functions in relation to your salary packaging including the

particular benefit, lease payments and allowances shall be managed

and paid through Reditus Group. The payment of your net pay and

superannuation will remain with your payroll department.

1 2

3 4

5

EMPLOYEE HANDBOOK 7

The following steps are critical for a salary packaging process to be successful. You will:

A successful salary packaging arrangement is a product of a comprehensive assessment of each

employee’s financial needs. Every employee will have the opportunity to thoroughly discuss

their salary packaging requirements and seek the professional advice and expertise of our salary

packaging consultants.

Attend a group presentation detailing

the various benefits available

Engage in an individual consultation on

the expected ouctomes of the packaging

Complete all the application

requirements

Receive a disclosure report on the

completed salary package

Enjoy the benefits of maximising your salary

EMPLOYEE HANDBOOK8

EMPLOYEE SERVICES

Employees’ access to quality information

about these benefits is always at the forefront

of Reditus business with knowledge as a core

philosophy. Information will be provided

at all times through this Employee Benefit

Book, regular conduct of group presentations

and from the seasoned advice of our salary

packaging consultants that can be reached

through telephone, email, or fax.

You will be given access to our online services

where you can:

View your transaction statements

Change your personal detai ls

Maintain motor vehicle logbooks

Enter vehicle odometer readings

Access application forms

Download addit ional information

+ More

AN OVERVIEW OF SALARY PACKAGING

EMPLOYEE HANDBOOK 9

NOVATED MOTOR VEHICLE LEASES

ATO Reference: IT2509

SALARY PACKAGING BENEFITS

A Novated lease is a tri-partied financial arrangement between the employee (as the lessee),

financier or fleet manager (as the lessor and the employer.

In a Novated lease agreement, the fleet manager leases a vehicle to the employee and novates

the responsibility to pay for the lease to the employer. During the lease term, the employee

will have full and unrestricted use of the vehicle. In the event of an employee termination

of (resignation, redundancy or other termination) , the novation agreement expires and full

accountability reverts to the employee. The vehicle remains the responsibility of the employee.

Since the concept of Novated leases is now common among employers, transfer of

arrangements from one employer to another is already a simple transaction for the employer

and the employee.

1

2

1. Lease agreement with

Novation to the employer

2. Lease payments from

pre-tax and post-tax

salary

EMPLOYEE HANDBOOK10

Besides the financial component on the lease, employees can have the opportunity

to arrange a fully maintained lease where the monthly lease payment also covers all

running costs of the vehicle such as:

Fuel (petrol card)

Registration

Insurance

Maintenance

Roadside assistance

THE ADVANTAGE OF A FULLY MAINTAINED LEASE INCLUDES:

Turning normally non-deductible motor vehicle operating costs into a pre-tax

deduction;

Allocating a fixed monthly payment for motor vehicle expenses that protects the

cashflow of the employee; and

Eliminating out of pocket expenses of operating the vehicle as

soon as the lease agreement is in place.

FULLY MAINTAINED LEASES

EMPLOYEE HANDBOOK 11

LEASE TYPES

In a Novated lease, the employee can have an added option to structure the lease

agreement into a:

Novated finance lease

Novated operating lease

NOVATED FINANCE LEASE - Residual Payment Required

Once the lease contract is terminated, the employee (lessee) will be required to pay

the calculated residual cost as a percentage of the original FBT value of the vehicle

in order to acquire its ownership.

The employee may have the option to renew the lease

on the vehicle for another fixed term in order to reduce the residual cost of the

vehicle.

NOVATED OPERATING LEASE - No Residual Payment

At the end of the lease period, the employee does not accrue any obligation on

the vehicle other than to return it to the leasing company with no encumbrance,

effectively negating any residual risk on the vehicle.

If the employee decides to purchase it instead, the lessor will have the opportunity

to sell it at the prevailing wholesale price.

EMPLOYEE HANDBOOK12

PLACING EXISTING FINANCE LEASES ‘UNDER MANAGEMENT’

If the company decides to expand the lease package of its employees from a finance

only option to include running costs and associated administration, Reditus can

facilitate the process of transitioning existing leases or even application for new

additions.

RELATIONSHIP MANAGEMENT

Each employee’s requirements will be comprehensively discussed by the fleet

manager to ensure the right vehicle is quoted and the price is sourced.

Our fleet manager can source the vehicle for you and can also accommodate any

existing relationships you may have with other vehicle dealerships.

Reditus can offer a finance lease or an operating lease option for new and some

used vehicles.

After the package is accepted, the vehicle will be is sourced and delivered to an

agreed location.

All other inclusions to the package as discussed above will be based on the

nominated kilometers.

Reports showing utilisation of the budget and fringe benefits will be made

accessible to the driver on a regular basis.

The package can be changed anytime within the lease term to ensure that it

meets or matches the vehicle operating costs.

Three months before the lease expires, each driver will be notified so that proper

measures can be taken to ensure smooth changeover of the vehicle.

EMPLOYEE HANDBOOK 13

NOVATED PROCESS FLOWCHART

ASSOCIATE MOTOR VEHICLE LEASES

ATO Reference: IT2509

3

1

1. Lease agreement

2. Lease payments from pre-tax

and post-tax salary

3. Company provides motor

vehicle

2

For tax purposes, an associate lease is structured in much the same way as a Novated lease. Only this

time, an associate of the employee (in most cases the spouse or another family member) acts as the

lessor.

The car of the associate will be leased to the employer and made available to its employee as a car

fringe benefit. The use of the car by either the employee or his/her associate is not limited to travels in

the nature of business related kilometers.

The associate lease agreement requires an employee to nominate his/her associate. An associate can

be any of the following:

Spouse

Partner

Relative

Family member over 18 years old

Family Company or Family Trust

EMPLOYEE HANDBOOK14

The income gained by the associate out of the lease payments from the associated lease

agreement will be taxable and must be declared in the associate’s income tax return at

the end of the financial year. However, by deducting all operating cost related to the use

of the vehicle, the associate will be able to offset any income earned. (see below).

Lease payments are determined independent of the relationship of the employee and his/

her associate and will be paid from the employee’s salary package.

PROCEDURES IN IMPLEMENTING AN ASSOCIATED LEASE:

The associate will provide details of the fixed costs associated with running the

vehicle

Registration and insurance

Roadside assistance/motor vehicle club membership

Maintenance and service

An estimated number of kilometers expected to driven per year will be required. It will be

the basis of computing for the rate of FBT and the projected fuel cost for the year.

The associate will be required to register for an ABN. Reditus Group can facilitate the

application process or the associate may directly apply online at www.abr.gov. au

Other necessary information needed from the associate will include your full name, date

of birth, and tax file number

DEDUCTIONS

All expenses related with operating the vehicle can be reimbursed by the associate.

Proper documentation (such as tax receipts) to support the claim must be kept and filed:

Fuel Maintenance and servicing costs

Depreciation Registration and Insurance

Roadside assistance Car wash

EMPLOYEE HANDBOOK 15

Tax concessions of about 50% on household expenses and travels of employees living

and working in remote areas of Australia are allowed under The Fringe Benefits Tax

Assessment Act 1986.

By definition, an employee is considered to be living in a remote area when his place of

residence is located at least 40 kilometres from a town with a census population (1981

census) between 14,000 and 130,000 or at least 100 kilometers from a town with a census

population of more than 130,000 or more.*

RENT PAYMENT

50% of the rental costs of an employee living in a rented house can be reimbursed free

of tax from his salary. For instance, you currently pay $400 per week on rent. You can

reimburse as much as $200 per week tax-free. This result to paying less income tax and

receiving a higher net take home pay.

A copy of the rental agreement or a letter from the landlord/real estate agent stating the

amount of rent payable is required for reimbursement.

MORTGAGE INTEREST

50% of mortgage interest for a house owned in a designated remote area can be

reimbursed tax-free from salary.

For example, if your July–December mortgage interest amounts to $8,000, you are

entitled to a $4,000 reimbursement from your pre-tax income. If the interest payment

is spread over six months, a total of $667 per month can be reimbursed free of tax from

salary.

Note: This benefit can only be paid after actual interest charges have been incurred. A

bank statement showing the amount of loan interest paid over a given period will be the

required document prior to reimbursement.

REMOTE AREA ALLOWANCES

* Calculations subject to change by ATO

EMPLOYEE HANDBOOK16

HOUSEHOLD FUEL

Expenditure on gas and electricity expenses in a dwelling within a remote area can also

be eligible for a 50% tax concession.

Bills must be paid first prior to reimbursement. A refund will be incorporated in the next

salary. A copy of the relevant tax invoice and proof of payment is required for the refund.

TRAVEL EXPENSES

Airline travel or road travel related expenses to and from a remote area and the capital

city of the state is allowed for 50% reimbursement. This benefit is available to the

employee and his family members.

Travel must not be less than three days and considered as an annual leave. Documentary

requirements to be submitted are as follows:

Travel declaration

Tax invoice showing proof of payment of airline tickets

Receipts for fuel and other expenses such as meals for road

travels

REMOTE AREA ALLOWANCES

EMPLOYEE HANDBOOK 17

LIVIING AWAY FROM HOME ALLOWANCE

An employee will be eligible to receive a tax-free Living Away From Home Allowance (LAFHA) in cases

where their work requires them to transfer and live away from their permanent place of residence.

LAFHA can be paid as a benefit for up to a period of 12 months.

OFFSHORE EMPLOYEES

A number of benefits are available to employees who are posted overseas – whether from Australia to

a foreign country or from a foreign country to Australia.

These benefits only apply to persons under PAYG withholding

– the employee must be taxed as an Australian resident or income

is paid from Australia even while working offshore.

Benfefits may include:

• Education of dependents

• Language

• Relocation costs

• Travel

LAFHA has two components:

1. LAFHA RENT

100% of the rent expense of an employee at his new location can be reimbursed from

his pre-tax salary.

A copy of the rental agreement will be required for validation purposes.

2. LAFHA FOOD

A food allowance will be provided based on the statutory amounts set by the

Australian Taxation Office in April of each year. The number of family members (adults and

children under 12 years of age) is included in the calculation.

EMPLOYEE HANDBOOK18

For many professions and careers such as tradesmen, engineers, medical practitioners,

education professionals, acquiring and maintaining sets of tools, apparatus and

specialised equipment is an indispensable component in the practice of their profession.

EXEMPT BENEFITS

TOOLS OF TRADE

Such items are reimbursable against an employee’s

income tax in July of each year. Conversely, these

items can also be obtained out of an employee’s salary

package as an expense to be reimbursed from their

pre-tax salary under the otherwise deductible rule.

HOW DOES IT WORK?

An employee can buy in advance his trade tools charged against his own personal account. The

tools procured must be required for work and must have the approval and recommendation of the

employer.

Documentation for the purchase such as full listing of the tools purchased and

the tax invoice must be provided to Reditus together with a completed expense

benefit reimbursement form so that the amount will be deducted from the

succeeding payroll.

INCOME PROTECTION INSURANCE

Premiums for income protection insurance can be included as an exempt item under the

otherwise deductible rule.

EMPLOYEE HANDBOOK 19

PROFESSIONAL MEMBERSHIPS

All professional memberships are FBT exempt. These would include: CPA, Law Society,

AIM, AICD, Engineers Association, other employer associations and Trade Union

memberships.

Note: sporting, gym and other social or lifestyle club memberships do not carry this

exemption.

SUPERANNUATION

A maximum of 15% contributions tax will only be allowed for additional contributions to

an employee’s superannuation made from his pre-tax salary. Reditus Group will be able to

present an assessment on the impact of any additional contributions to

the salary package.

EMPLOYEE HANDBOOK20

SELF-EDUCATION EXPENSES

Tuition fees of employees pursuing undergraduate or post graduate courses in

universities and higher learning institutions can be included in a salary package to be

deducted from their pre-tax salary with prior approval from their department head.

INVESTMENT LOANS AND PROPERTY MAINTENANCE COSTS

Interest payments on property or share investment loans can be included as part of a

salary packaging arrangement deductible from an employee’s pre-tax salary. It will be

limited to the interest payments only.

AIRLINE CLUB MEMBERSHIPS

Charges collected for membership in airline clubs such as Qantas Club, Virgin Blue’s ‘The

Lounge’and such other guilds are exempt from FBT and are considered as an allowable

benefit to employees.

EMPLOYEE HANDBOOK 21

Reditus (n) (Latin);return / income / revenue / reward

07 3054 1000

info@reditus.com.au

www.reditus.com.au

07 3054 1099

Level 2 50 McDougall Street Milton, QLD 4064