Use pre-tax dollars to pay for your rent and potentially lower your taxable income
Who can salary package rental payments?
This salary packaging option is available for the following industries:
What is salary packaging rent?
If you’re a renter and eligible for salary packaging, you’ll want to know about the rent benefit. This benefit allows eligible workers to pay their rent using pre-tax dollars.
Ordinarily you would pay rent using your money after tax is taken out, but salary packaging allows you to pay for it – up to a selected or “capped” amount – before tax.
By taking advantage of the rent benefit, you know that your rent is budgeted for every month, Maxxia is managing the funds for you, and best of all – you could potentially save some cash by reducing your tax!
How much can I package?
Rent is included in the Living Expenses benefit as part of ATO-approved salary packaging.
Employees in the Healthcare sector can package $9,010 towards payments considered Living Expenses. Employees in the Charity sector can package $15,900 of their pre-tax income.
Why should I pay for rent through salary packaging?
Here’s just some of the reasons:
- Potential to reduce your taxable income every year.
- You could increase your disposable income and savings.
- Enjoy the convenience of setting regular reimbursements from your Maxxia account to your bank account to cover rental payments.
How does salary packaging rent work?
Salary packaging your rent can seem overwhelming, so we’ll try to break it down.
Let’s say your rent is $1,500 a month, or $18,000 a year. If you get paid monthly, your employer will send $1,500 of your pay cheque to Maxxia before tax is taken out. If you have no other benefits, the remainder of your pay is then taxed and paid into your bank account, to spend how you please.
You can set up regular reimbursements from your Maxxia account to make life easier. These payments are in line with the funds Maxxia receives from your employer.
How much can you save through salary packaging?
The below table demonstrates how salary packaging can potentially save you money by reducing your taxable income, using the healthcare cap.
|Without Salary Packaging||With Salary Packaging|
|Rent Salary Package Cap||$0.00||$9,010.00|
|Input Tax Credits||$0.00||$20.00|
|Tax & Medicare||$18,067.00||$14,889.55|
|Rent Without Salary Packaging||$9,010.00||$0.00|
Imagine Maxine earns $80,000 a year as an intern doctor. She rents a share house with other junior doctors, and her rent is $18,000 per year. Because she works at a public hospital, she is able to salary package up to $9,010 of her salary before tax is taken out. Rent is her biggest expense, so she takes advantage of the rent benefit and uses pre-tax dollars to pay her landlord each month.
By paying for rent with salary packaging, Maxine could be taking home an extra $2,977.45 per year*! She is also paying half of her yearly rent tax-free.
Important things to know
You can only salary package rent payments for a property you live in and with a lease in your name or jointly with others.
*Assumptions: The estimated potential tax benefit is based on the assumption that an eligible employee salary packages the specified amount. FBT rates effective 1 July 2023 and PAYG tax rates effective 1 July 2023 have been used and average Fees and Charges are included. The actual administration fee that applies to you may vary depending on your employer. Tax, benefit and Medicare Levy calculations are approximate, and assume no other taxable income is received. HELP repayments and taxation surcharges are excluded. This general information doesn’t take your personal circumstances into account. Please consider whether this information is right for you before making a decision and seek professional independent tax or financial advice. Conditions and fees apply, along with credit assessment criteria for lease and loan products. The availability of benefits is subject to your employer’s approval.
Things you need to know: The above information is not intended to constitute taxation or financial product advice. Your benefits and savings will vary depending on your personal objectives, financial situation and needs. We recommend you obtain independent financial advice before making any financial decisions. Eligibility criteria and terms and conditions apply. All salary packaging proposals are subject to the requirements of your employer. Administration fees will apply. The actual administration fee that applies to you may vary depending on your employer. Maxxia may pay and receive commission or rebates in connection with some services and products it provides or arranges to be provided by third parties.
Maxxia Pty Ltd | ABN 39 082 449 036.