On 1 July 2019, Steve Miller accepted the position of chief operating officer (COO) of Abracadabra Pty Ltd. The company owns and operates a chain of toy stores throughout Australia. Steve's gross salary (excluding the 9.5% superannuation contributions by his employer) is $180,000 per annum. However, Steve informs you that he has been offered the opportunity by his employer to salary package four (4) specific items from pre-tax dollars and take the remaining amount as gross salary. Steve seeks your advice to assist him determine whether he is financially better off to simply take a $180,000 gross cash salary or package the four items offered to him by his employer.

1. Fully paid for a car (novated lease) $45,000 lease value, $990 gst incl monthly. (fuel, oil, running expenses $6600 for the year incl) 48 months lease term (25% work related purposes), 3000 work kms (12,000 / year) ($990 * 48 = $47,520)

2. MBA QUT, $10,400 two modules the year, Gst Excl (100% work related)

3. QANTAS lounge, $550 for year gst incl (all work related)

4. Extra super (300/mth) $3600/year

No other sources of Income

No HECS / HELP debt

Steve is given the choice to salary sacrifice all four items, or none at all. In other words, he cannot elect to pick and choose which of the four (4) options items he wants to salary package.

In other words, Abracadabra Pty Ltd has agreed to pay the same 9.5% compulsory employer superannuation contributions under both options, regardless of whether Steve salary packages the four items or not.

In addition to the above rates, a 2% Medicare Levy is payable by all resident Australian taxpayers.

Assume that Steve has comprehensive private health insurance with Bupa, which covers him for the entire 2020 financial year. Hence, Steve is not liable for the Medicare Levy Surcharge.

	Salary Only	Salary Package	Comments
Gross cash salary	$180,000	$180,000
Revised gross salary (after salary packaging)
2020 Taxable income
Tax on taxable income
Add: 2% Medicare Levy
Total tax payable
Net salary (after tax payable)
Less: Payments after tax (for salary only option)
Overall Net position
Better off by $ __________
Decision - Salary only or salary package?