In this post, we will learn about CBB Salary Packaging in detail. As you read through this post, you will get familiar with everything from CBB and salary packaging to eligibility and benefits. I hope that this article can give you useful knowledge for your finance.
Who is CBB?
CBB or Community Business Bureau was established in 1995 with the objective of providing assistance for the administrative requirements in the community service sector. Their particular focus was on payroll and financial areas. Since then, CBB has grown as a unique organisation that helps Non-for-Profit groups to accomplish their social obligations. They are based in Adelaide, Darwin, Perth, and Melbourne, and they aim to continue their service for the community and government sectors.
What is Salary Packaging?
The next question you might ask would be about salary packaging (SP). Salary packaging is not a unique feature of CBB, but a general concept you can use in Australia. However, It does not mean everyone can enjoy the benefits of SP. According to ASIC (Australian Securities & Investments Commission), SP is an agreement with your employer where you can purchase goods and services using your pre-tax salary. For example, you can salary package certain things such as computers, cars, childcare, and super. This will allow you to reduce taxable income and save more money. One important fact is you cannot use SP for the purchases that have already made.
Who are eligible for Salary Packaging?
As mentioned, not everyone can have salary packaging since this is something you need agreement from your employer. ASIC explains that most of the Australian employers provide salary packaging for super, but for the other items, they might limit who can have it. So, to make sure, ask your employer if you are eligible to purchase items using your pre-tax income. CBB provides a convenient way for salary packaging for its employees. I will explain what “convenient way” means in the later section.
It will be wise to consider your income level before using salary packaging. ASIC points out that SP usually is more effective for those whose annual salary is in a mid-to-high range.
Three main types of salary package
There are three main types that you can salary package – each has several distinctive items. ASIC lists three categories as follows.
The first type is the fringe benefits. It will be easier to understand if you look at the examples below.
- Cars purchased by salary sacrifice
- Health insurance
- Loans usually for a car
- School fees
- Childcare fees
- Non-reportable fringe benefits such as entertainment and car parking
- And, other personal expenses
For these items, you will not have to pay tax nor Medicare levy on the amount of the items you purchased. Plus, the benefit values you receive for the financial year will appear on your payment summary at tax time. Among the examples above, there are certain items that you cannot be reported thus not shown in the payment summary such as entertainment and car parking.
Like the non-reportable fringe benefits, these exempt benefits also will not be shown in your payment summary. For the exempt benefits, your employer does not have to pay fringe benefits tax on the items. Example of the exempt benefits include:
- Portable electronic devices like smartphones, laptops, tablets, and more.
- Computer software
- Protective clothes
- Tools of the trade
Salary sacrifice superannuation
Depending on the level of your salary, it could be beneficial for you to put some of your pre-tax income into your superannuation. It is good for you and your employer since the extra contribution will be taxed by the super fund at 15% which is the same as your employer’s contributions. Scott Pape, the author of Barefoot Investor, also encourages you to keep your super contribution at 15%.
On his blog post, Increase Your Super to 15 Percent, he explains that the 15 percent super strategy has been proven to be effective for your long-term wealth. Since your employer contributes 9.5%, you only need to add 5.5%. For this strategy, he said, “That’s why super should be the centrepiece of your long-term investment program, and why it’s the ultimate way to automatically build your wealth.”
Who are eligible for CBB Salary Packaging?
We have learned many useful tips and strategies using salary packaging. Now that we have good knowledge about SP, we are ready to dive into CBB’s SP. First, let’s find out who will be eligible for CBB SP.
To be eligible, you have to be an employee of an organisation with Public Benevolent Institution (PBI) or Health Promotion Charity (HPC) status as approved by the Australian Tax Office (ATO). So, if you work either for PBI or HPC, you will be able to use the salary package.
How to use CBB salary package?
If you are eligible, you will be able to create your account by making an appointment with a responsible officer. To arrange an appointment, you can use this page – Book your sign up appointment. Once you have an active account, you can re-direct a certain portion of your salary to your CBB salary packaging account. When you do that, it will be free of income tax. CBB explains that the most popular option is to load your tax-free cash onto a CBB Salary Packaging Card every two weeks.
This is just like your any other debit card. You can use this card at any location where VISA is accepted. You can use it at grocery stores, petrol stations, restaurants, cinemas, online stores, and many more. The money you spend is tax-free that in the long-term, you can save huge amount of money. So, if you are eligible, using salary packaging will bring great benefits to your finance.
For those who are tech-savvy, CBB Salary Package also has a mobile app and a mobile wallet. With a mobile wallet, you don’t have to bring a physical debit card in your wallet. You will only need your smartphone and the app to make a payment.
As you can notice from the card image, CBB uses BeyondBank for salary packaging. Like any other bank, they have a website for Internet banking and mobile app.
How much benefit can I have?
The benefit amount depends on your salary. To give you an idea of how much you can save, I brought the following estimates.
|Annual Salary||Annual Benefit||Fortnightly Benefit|
The fortnightly benefit might not satisfy you, but if you annualise it, the amount is quite high. And, in the long-term, this will be even greater. Please note that these amounts are from CBB salary sacrifice estimation. Other salary sacrifices may have benefit amount.
It’s great! What’s the catch then?
It is funny but understandable that one of the frequently asked questions in CBB is it is too good to be true. I get it. We all have to spend money to eat, live, and enjoy. If we are going to spend anyway, what can be better than spending tax-free dollars? So, it seems that some people doubt the credibility of the benefit. I want to say there is no catch. Salary packaging is an approved benefit by the government, and many people are using it.
Can I change my contribution amount?
I want to say don’t worry too much about your initial contribution amount for salary packaging with CBB. According to CBB, you can make changes in your salary packaging payment and the way your package money is allocated. When you want to request a change, you need to use their form that can be found here.
I tried to find an easy case study for your better understanding. The one on the MoneySmart website was a good example. Now let’s meet Peter! His annual salary is $100,000, and he negotiated with his employer to salary package a new car which is worth $20,000. Also, he decided to put an additional $5,000 a year into his superannuation fund. This makes the sum of the salary package $25,000.
And, this means that the taxable income of Peter will become $75,000 per year. The value of the new car will appear on his payment summary in the financial year. Plus, the 5,000 superannuation contribution will also be shown in the payment summary. In this case, if Peter does not use salary package, he will pay:
- $24,497 for income tax
- $2,000 for Medicare levy
- The marginal tax rate is 37%
When he uses the salary packages and make his taxable income $75,000 per year,
- $15,922 for income tax
- $1,500 for Medicare levy
- The marginal tax rate is 32.5%
You can see that with the income tax alone, Peter can save nearly $10K per year.
Interest Trend in Salary Package
You may have already heard about the salary package here and there. I’d like to ask, then, has this policy gained and maintained interest from the public? Whether it is government policy or commercial product and service, if the benefit or the quality is not good, it will eventually die as it loses people’s attention. It does not seem to be the case for the salary package.
I frequently use Google Trends when I need to research the level of interest from people on the Internet. You know Google is the largest search engine. They keep track of search history in their repository and share it with the public via an open service called Google Trends. From Google Trends, I was able to generate the graph below.
This graph shows the trend line of salary packaging over the past 10 years in Australia. As you can see, it has been able to maintain a consistent level of interest. The period is 10 years, which is long-term. This proves that Australians kept showing their love toward SP, and considering the trend, it is likely to continue in the future.
If we break down the interest by state, Northern Territory has shown the largest interest. To see the rank, find the list icon at the right bottom and click it. After NT, the second biggest was from ACT followed by TAS and SA.
From my research, I found that salary packaging is a great policy that many people count on. As we could learn from Google Trends, it has been able to sustain public attention for the past 10 years. Salary packaging seems to add more value since you can have such a great convenience with the BeyondBank’s VISA card and digital wallet. If you are eligible, you will want to consider to use it. Save more with CBB Salary Packaging!
I included the following useful links for you.