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SALARY PACKAGING INFORMATION GUIDE

EFFECTIVE: JANUARY 2010

TABLE of CONTENTS

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Salary Packaging Benefits Eligibility Motor Vehicles (Novated Lease) What to expect when Salary Packaging Commencing Salary Packaging Changing a Salary Packaging arrangement Ceasing a Salary Packaging arrangement Reconciliation Secondment Leave Further Information APPENDIX A - Western Australian Government Approved Deed of Novation

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IMPORTANT INFORMATION The information provided in this document is factual information only and has been prepared without consideration of your personal circumstances. The Department of Education and Training (Department), Maxxia Australia and Selectus Employee Benefits do not provide you with any form of financial, taxation or financial product advice on the relative merits of salary packaging benefits or on any other basis.

3 1 SALARY PACKAGING
Salary packaging is an arrangement that allows you to sacrifice your gross salary to obtain benefits. The benefit is deducted from your pre-tax salary which reduces your taxable income and the amount of tax payable. Salary packaging is available to all Department of Education and Training employees. Participation in salary packaging is voluntary. You can determine the mix of salary and benefits that will constitute your salary package. The administration of salary packaging is managed by a salary packaging provider (SPP). The SPP may receive commissions or rebates in connection with some services it provides or arranges to be provided by third parties. Salary packaging is available to eligible employees (refer to section 3), who have received an offer of flexible remuneration from the Department (refer to section 6). You should seek your own independent financial planning advice before making a decision with respect to salary packaging or novated motor vehicle leasing.

BENEFITS
There are a range of benefits that can be salary packaged. Available benefits are: new or second-hand motor vehicles (for private use) by way of a novated lease; superannuation contributions to the Government Employees Superannuation Board (GESB) (organised free of charge through the Departments Personnel and Payroll Branch); superannuation contributions to a private superannuation fund (organised through the salary packaging provider); notebook computers (primary purpose of which is work related and limited to one notebook computer provided by your employer or purchased by you and reimbursed, in whole or part, in any fringe benefits tax (FBT) year); remote area housing benefits (for eligible remotely located employees); Otherwise deductable items such as: mobile phone (predominantly for business use); uniforms; work related travel expenses; professional subscriptions; home/office expenses; financial counselling (related to salary packaging); and self education expenses. Additional superannuation contributions can be arranged directly through the Departments Personnel and Payroll branch by emailing gesbpp@det.wa.edu.au. There are no additional charges for this service. NOTEBOOK/LAPTOP COMPUTERS (Business Use) Only notebook computers used primarily for work-related purposes can be salary packaged. Employees must make a declaration to substantiate that the notebook computer will be used primarily for work purposes. The declaration must be counter signed by the employees line-manager who in accordance with section 58X of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) is required to have a basis for concluding that the notebook computer is primarily for use in the employees employment. This conclusion is based on intended use of the time benefit is provided. The declaration pro-forma is available from the relevant salary packaging provider.

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REMOTE AREA HOUSING BENEFITS This benefit applies to employees, renting GROH accommodation through the Department, whose usual place of employment is in an area considered remote as defined under the Australian Taxation Office (ATO) current Fringe Benefits Tax (FBT) provisions. The Department will provide this service internally at no charge to the employee. However, if a service provider is utilised all associated costs will be borne by the employee.

ELIGIBILITY
Different benefits are available depending on the terms of your employment. The table below shows the benefits available. Employment status Benefit Car (by novated lease) Superannuation contributions (to GESB) Superannuation contributions (to private superannuation fund) Laptops or notebook computers (primarily used for work-related purpose) Mobile phones (business use) Work related travel expenses Professional subscriptions Home/office expenses Financial counselling (related to salary packaging) Self-education expenses Remote Area Housing Benefits Casual Fixed-term contract (less than one term) Fixed-term contract (one term or more) Fixed-term contract (four terms or more) Permanent

5 4 MOTOR VEHICLE LEASE (NOVATED LEASE)


A novated lease is an agreement between an employer, employee and finance company in which the employer makes the repayments by deducting them from the employees pre-tax salary for the term of the lease or until the employee ceases employment. Novated leases can provide: a personal choice of new or second-hand vehicles; and tax free expenditure on running costs of the car. In addition to the car lease payments, all running costs (such as annual registration and comprehensive insurance, fuel, servicing and repairs) of the leased vehicle are also paid through the salary package. You will also be provided with a motor vehicle charge card which can be used for the purchase of fuel. A novated lease is transferable and can be taken with you if you cease employment with the Department, provided your new employer offers salary packaging. Alternatively, you can keep the lease with the financial company and make direct repayments to the company using after tax money. To enter into a motor vehicle novated lease you must have a fixed term contract of four terms or more, or be a permanent employee. The Western Australian Government approved Deed of Novation (included at Appendix A) must be used in all instances when establishing a novated lease. You should obtain financial advice before entering into a novated lease arrangement. Licensed financial advisors may charge a fee to establish and manage a novated lease in addition to any salary packaging fee. Currently there are three ways to set up a novated lease. You can: contact the SPP and organise a fully maintained novated lease (managed option). organise assistance from a licensed financial advisor (self-managed); or organise it yourself (self-managed). 4.1 LUXURY CARS Luxury cars can be salary packaged but this will be restricted by the luxury car tax limit which limits the amount of GST that can be claimed back. Generally, if the car is priced higher than the car limit, the maximum amount of GST credit you can claim is one-eleventh of that limit. The luxury car tax limit is adjusted annually. More information about luxury car tax is available from the Australian Taxation Office website at http://www.ato.gov.au/businesses/content.asp?doc=/Content/18276.htm Further details about salary packaging your existing car, or a car you intend to purchase, should be obtained directly from the SPP.

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5.1

WHAT TO EXPECT WHEN SALARY PACKAGING


SALARY ADJUSTMENTS When salary packaging has commenced, the following will be deducted on a pro-rata basis from your salary: the cost of the selected benefit(s); any FBT applicable to these benefits; and the administration cost (details of these costs should be obtained directly from the SPP). The funds for the selected benefit(s) will be provided to the SPP for disbursement.

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The SPP will not commence regular monthly payments (e.g. lease payments and additional superannuation) until three fortnightly contributions have been received from SPP on your behalf. It takes three fortnightly payments for enough money to accumulate in your account to make a monthly payment.

You can nominate an annual amount for the benefits, provided that the total amount does not exceed your base salary. 5.2 ADMINISTRATIVE COSTS Salary packaging arrangements will usually incur administrative costs. Details of these costs should be obtained directly from the SPP. 5.3 PAYMENTS Benefits which have a fixed instalment amount and occur on a regular basis, such as regular superannuation contributions or motor vehicle lease payments, will be paid as a regular payment. Non-regular payments are made for benefits which do not have a fixed instalment date and do not occur on a regular basis. Payments will be made on receipt of a completed Payment/Reimbursement Claim Form available from the SPP. If you directly pay the cost of a benefit, you will be reimbursed on receipt of a completed Payment/Reimbursement Claim Form. You will need to provide a paid tax invoice for the expense being claimed. Reimbursement will be made by Electronic Funds Transfer to your nominated bank or credit union account. 5.4 REPORTS You will receive reports that provide details on payments made for your benefit(s). Instructions for accessing the reports will be provided at the commencement of the salary packaging arrangement. 5.5 TERMS AND CONDITIONS Benefit payments will only be made when the SPP has received a salary packaging contribution. Where insufficient package funds are available to cover a payment no benefit payment will be made. All benefit payments will cease immediately for employees that terminate employment or are on leave without pay, unless alternative arrangements have been made. Only benefits approved by the Department can be salary packaged. Any unspent funds may be returned to the employee through the payroll system when a change is made to the salary package, and a full reconciliation of funds has taken place.

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TAXATION The cash salary component of the salary package will continue to be subject to Pay As You Go (PAYG) taxation deductions in accordance with the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.

Each benefit payment falls into one of the following three taxation categories: 1. Exempt Benefits - otherwise deductible items, (refer to salary packaging provider guidelines).

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2. 3. Concessionally taxed items - eg. Superannuation, (refer to salary packaging provider guidelines) Subject to full FBT liability (refer to salary packaging provider guidelines).

FBT is the tax payable on a non-salary benefit provided to an employee. Benefit items, that are either specifically exempt or not subject to FBT because an employer could usually claim a tax deduction for the expense as an otherwise deductible item, do not incur FBT in your income tax return. If otherwise deductible benefits are included in a salary package they cannot be claimed as a tax deductible item in an income tax return.

COMMENCING SALARY PACKAGING


Before commencing a salary packaging arrangement an offer of flexible remuneration must be obtained from the Personnel and Payroll Branch. To obtain an offer of flexible remuneration, contact the Salary Packaging Officer at the Personnel and Payroll Branch on telephone 9264 8773/9264 8766, or email salarypackagingpp@det.wa.edu.au. Further details regarding commencing a salary packaging arrangement should be obtained directly from the SPP.

CHANGING A SALARY PACKAGING AGREEMENT


You can make one change to your salary package at no cost during the FBT year. The FBT year is from 1 April to 31 March the next year. Additional changes may be made during the FBT year. However, these changes may be subject to an additional fee. Details should be obtained directly from the SPP.

CEASING A SALARY PACKAGING AGREEMENT


You may elect to cease salary packaging by giving at least one months notice in writing to the SPP. The notice must include your cessation date to allow the SPP to send final payments and determine any action to be taken with account balances. Any additional costs incurred as the result of cessation of your salary package arrangements must be paid by you and will be deducted from your final payment. Salary packaging arrangements will cease if your pay is suspended or if your employment is terminated. If you have packaged a FBT item, you must resolve all FBT issues with the SPP before ceasing your salary packaging agreement. If you choose to recommence salary packaging within the same FBT year, you may be required to meet the additional costs of re-establishing the packaging arrangements.

8 9 RECONCILIATION
A reconciliation of the salary package will occur when you alter your salary package. Any balance remaining in your salary package on termination of employment will be paid as salary and taxed accordingly. However, you may be able to roll any unspent monies to GESB if you already have an arrangement to salary package superannuation to GESB through your SPP.

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SECONDMENT
If you are considering a secondment, you will need to consider the effect this will have on your salary packaging arrangement. You can contact the Salary Packaging Officer at the Personnel and Payroll Branch on telephone 9264 8773/9264 8766, or email salarypackagingpp@det.wa.edu.au.

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UNPAID LEAVE
You may be required to cease or suspend salary packaging arrangements during any period of unpaid leave. You must notify the SPP if your salary packaging arrangements will be affected as the result of unpaid leave. Wherever possible, you should notify the SPP prior to starting the leave period to enable the necessary administrative arrangements to be made. In most instances, approval of any period of unpaid leave will require you to cease or suspend salary packaging. Suspension of salary packaging during unpaid leave requires you to make payments directly to your creditor (e.g. finance company for a novated lease) using after tax money.

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FURTHER INFORMATION
If you require any further information regarding salary packaging you should contact the SPP directly. Any complaints about your salary packaging arrangement should also be raised directly with the SPP. The Department currently has two SPPs: Maxxia Australia.

Further details regarding Maxxias services should be obtained from their website www.maxxia.com.au (username - EDWA, password - EDUCATION), or by calling one of the following telephone numbers: General Enquiries Local representative 1300 123123 08 9429 8818

Selectus Employee Benefits (Selectus).

Further details regarding Selectus services should be obtained from their website www.selectus.com.au (username - DET WA, password - selectus), or by calling one of the following telephone numbers: General Enquiries Local representative 1300 669 118 08 9474 2544

APPENDIX A - WESTERN AUSTRALIAN GOVERNMENT APPROVED DEED OF NOVATION

NAME OF EMPLOYER ("Employer")

(NAME OF FINANCE COMPANY) ("Finance Company")

and

(NAME OF EMPLOYEE) ("Employee")

DEED OF NOVATION

Note - Before commencing a salary packaging arrangement an offer of flexible remuneration must be obtained from the Personnel and Payroll Branch.

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TABLE OF CONTENTS

DEFINITIONS AND INTERPRETATION.......................................................................................................

NOVATION OF LEASE OBLIGATIONS .......................................................................................................

TERMINATION OF VEHICLE TO THE EMPLOYEE ....................................................................................

VEHICLE USE AND EMPLOYEE'S OBLIGATION .......................................................................................

INDEMNITY ...............................................................................................................................................

NOTICES ...................................................................................................................................................

WAIVER ....................................................................................................................................................

ASSIGNMENT ............................................................................................................................................

VARIATIONS .............................................................................................................................................

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GOVERNING LAW AND JURISDICTION .....................................................................................................

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TRUSTEE COVENANTS .............................................................................................................................

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ACKNOWLEDGMENTS BY EMPLOYEE .....................................................................................................

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INCONSISTENCIES BETWEEN DEED AND NOVATED VEHICLE LEASE.....................................................

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THIS DEED OF NOVATION is made on (Insert date) PARTIES:

(Insert Employer's Name, Address and ACN if applicable)

("Employer")

2 (Insert Finance Company's Name, Address and ACN if applicable) ("Finance Company")

(Insert Employee's Name and Address)

("Employee")

RECITALS: A. B. C. The Employee and the Finance Company are parties to the Lease under which the Employee has leased the vehicle from the Finance Company. The Employee and the Finance Company hereby contractually extinguish and substitute the Lease in respect of the vehicle on the terms and conditions set out in this Deed of Novation. The Employer and the Finance Company have agreed to enter into a novated vehicle lease and assume rights and obligations under the novated vehicle lease on substantially the same terms as the Lease between the Employee and the Finance Company subject to the terms and conditions set out in this Deed of Novation.

OPERATIVE PROVISIONS OF THIS DEED OF NOVATION: 1 DEFINITIONS AND INTERPRETATION 1.1 1.2 Terms of this Deed which have not been defined in Clause 1.2 shall have the same meaning as is given to those terms in the Lease between the Employee and the Finance Company. In this Deed the following terms shall have the meaning given to them in this clause unless otherwise expressly provided in this Deed: "Deed" means this Deed of Novation including the recitals, which recitals are deemed by the parties to be true and correct in all material particulars. "Date of Termination" means the earlier of: (a) (b) (c) (d) The date of termination (for whatever reason) of the Employee's employment with the Employer; The date of death of the Employee; The Employer at its sole discretion notifying the Employee that Clause 3 of this Deed shall apply; and The date of termination of the Novated Vehicle Lease.

"Lease" means the lease between the Finance Company and the Employee (a copy of which is annexed to this Deed) and in which is set out the terms and conditions on which the Vehicle is provided to the Employee. "Novated Vehicle Lease" means the lease between the Employer and the Finance Company made pursuant to this Deed whereby the Employer agrees to lease the Vehicle from the Finance Company. "Residual Obligation" means the obligation, if any, to make a payment upon the expiration of the Lease that is solely referable to any residual value of the Vehicle as provided for in the Lease. "Vehicle" means the vehicle referred to in the Lease.

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1.3 In this Deed unless otherwise expressly provided: (a) (b) (c) (d) Reference to a person includes any other entity recognised by law and vice versa. Words importing a singular number include plural numbers and vice versa. Words importing one gender include every gender. Any reference to any of the parties by the defined terms includes that party's executors, administrators or permitted assigns, or being a company, its successors or permitted assigns. Reference to writing includes any mode of representing or reproducing words in a permanent and visible form and includes telex and facsimile transmissions. Clause headings are for reference only. Reference to a document, agreement or deed including this Deed includes a reference to that document, agreement or deed as amended, novated, supplemented, varied or replaced from time to time by the parties. A reference to a business day is a reference to any day in which the trading Banks are open for business in the capital city of the State or Territory in which this Deed is executed by the Finance Company, excluding a Saturday, Sunday or public holiday and if any act, matter or thing is required under this Deed to be done on a day that is not a business day then the day on which the act, matter or thing is required to be done shall be deemed to be the next business day.

(e) (f)

(g)

NOVATION OF LEASE OBLIGATIONS 2.1 From the date of execution of this Deed: (a) The Lease between the Finance Company and the Employee shall terminate and the Finance Company and the Employee each hereby waive all of their rights under the Lease and each release and forever discharge the other from all obligations under and in respect of the Lease. The Finance Company and the Employer shall novate obligations towards each other and shall acquire rights against each other which obligations and rights shall be identical in all respects to the rights and obligations which previously existed between the Finance Company and the Employee under the Lease which is terminated in accordance with Clause 2.1(a) and the Finance Company and the Employer hereby agree to enter into a vehicle lease (the "Novated Vehicle Lease") and that the terms of the Novated Vehicle Lease shall be identical to the terms of the Lease except for the following: (i) (ii) (iii) Any reference in the Lease to the Employee shall be read as a reference to the Employer. The date of commencement of the Novated Vehicle Lease shall be the date of execution of this Deed. The term of the Novated Vehicle Lease shall be the unexpired term of the Lease between the Finance Company and the Employee, had that Lease not been terminated in accordance with this Deed.

(b)

NOVATION OF VEHICLE TO THE EMPLOYEE On the Date of Termination all of the Employer's rights and obligations under and in respect of the Novated Vehicle Lease shall become rights and obligations of the Employee were references in the Novated Vehicle Lease to the Employer were references to the Employee. On the Date of Termination the Employer shall cease to have the rights and obligations under the Novated Vehicle Lease other than any liability of the Employer for any unpaid lease payments or unpaid interest due and payable as at the Date of Termination.

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4 VEHICLE USE AND EMPLOYEE'S OBLIGATION 4.1 Up to and including the Date of Termination the Employer shall make the Vehicle available to the Employee as part of the Employee's agreed remuneration package with the Employer and the Finance Company hereby consents to the Vehicle being made available to the Employee in this manner. The Employee shall have use of the Vehicle during the term of the Novated Vehicle Lease and furthermore, the Employee (a) shall keep the Vehicle under the Employee's possession and control and shall notify the Finance Company and the Employer of any change of the Employee's residential address; must not carry dangerous, hazardous or noxious substances in the Vehicle nor carry any load in excess of the manufacturer's recommended carrying load for the Vehicle; must not use the Vehicle in any race or other competition or as a taxi, hire car or otherwise offer the Vehicle for rental or hire; must not use the Vehicle in any way that would void any manufacturer's or supplier's warranty in respect of the Vehicle; shall be responsible for all maintenance and running costs in relation to the Vehicle (including registration fees, third party insurance premiums, repairs, replacement parts, oil and fuel) and shall keep the Vehicle in good condition and working order; shall maintain comprehensive insurance over the Vehicle of a type acceptable to the Finance Company and the Employer which shall reflect the interests of the Finance Company and the Employer in the Vehicle; shall not do anything in relation to the Vehicle which would result in the insurer refusing a claim under the insurance policy or which would otherwise void the insurance on the Vehicle.

4.2

(b)

(c) (d) (e)

(f)

(g)

INDEMNITY 5.1 The Employee hereby indemnifies the Employer and shall keep indemnified and hold the Employer harmless against all claims, costs, demands, actions, charges, expenses, loss and damage whatsoever and howsoever arising (other than any rental payments and interest due under the Novated Vehicle Lease) which the Employer may sustain, incur or suffer whether directly or indirectly as a result of or in connection with the Employee failing, refusing or neglecting to duly and punctually perform its obligations under this Deed or in respect of any act or omission of the Employee in relation to the Vehicle. The Indemnity by the Employee under this Clause is a continuing obligation separate and independent from any other obligation under this Deed and may be enforced by the Employer before and without first incurring any expense or making any payment to any person.

5.2

NOTICES 6.1 Any notice, approval, consent or other communication under this Deed: (a) (b) Must be in writing; and Must be left at the address of the addressee or sent by prepaid post or by facsimile to the address of the addressee specified in this Deed or if the addressee has notified another address or facsimile number then to that new address or facsimile number.

6.2 6.3

A notice, approval, consent or other communication takes effect from the time it is received unless a later time is specified in it. A letter or facsimile is taken to be received:

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(a) (b) In the case of a posted letter, on the third business day after posting or in the case of international post, the seventh day; and In the case of a facsimile, on production of a transmission report by the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient.

WAIVER 7.1 The failure or omission of a party at any time to: (a) (b) enforce or require the strict observance of or compliance with any provision of this Deed; or exercise any election or discretion under this Deed;

shall not operate as a waiver of them or of the rights of a party, whether expressed or implied arising under this Deed. 7.2 A power or right given to a party under this Deed may only be waived in writing and executed by the party to be bound by the waiver.

ASSIGNMENT The Employer shall not transfer or assign the Employer's rights under this Deed without the prior written consent of the Finance Company which consent shall not be unreasonably withheld and provided that the Finance Company may require that the Employer pay all fees and expenses that the Finance Company may incur or which may arise in connection with the proposed transfer or assignment and that any proposed transferee or assignee of the Employer's rights shall agree in writing with the Finance Company to observe and perform all of the terms, conditions and restrictions on the part of the Employer in this Deed, whether expressed or implied as if the proposed transferee or assignee were an original contracting party to this Deed.

VARIATIONS 9.1 9.2 Provisions of this Deed may only be varied by further written agreement of the parties. No variation of the provisions of this Deed shall be expressed or inferred from a course of dealing.

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GOVERNING LAW AND JURISDICTION This Deed shall be governed by and construed in accordance with the Laws of the State or Territory in which this Deed is executed by the Finance Company and each party to this Deed agrees that the Courts of that State or Territory are to have jurisdiction to settle any claim or matter arising under this Deed and each party submits to the jurisdiction of the Courts of that State or Territory.

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TRUSTEE COVENANTS If any of the parties has entered into this Deed in the capacity as trustee of a trust, then that party warrants to each of the other parties as follows: (a) That the party in its capacity as trustee is empowered by the trust deed (the "Trust Instrument") constituting the trust to execute this Deed and to do all things required by this Deed and all necessary meetings have been held, all necessary resolutions have been passed and all consents, approvals and other procedural matters have been obtained or attended to as are required under the Trust Instrument or otherwise. The party is the duly appointed Trustee of the Trust. The party in its capacity as Trustee will duly observe and perform its obligations as Trustee of the Trust.

(b) (c)

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(d) (e) All warranties and covenants given by the party in its capacity as Trustee shall bind that party as Trustee of the Trust and all additional or substituted Trustees of that Trust. In executing and delivering this Deed and entering into the transactions contemplated by this Deed, it has properly complied with its obligations to the beneficiaries of the Trust and the execution and delivery of this Deed and the entry into the transactions contemplated by this Deed are for the benefit of the beneficiaries of the Trust and do not constitute a conflict of interest or duty or breach of trust. the party has a right to be indemnified out of all of the property of the Trust in relation to all of its obligations under this Deed; (i.) (ii.) the party has not released or disposed of its equitable lien over the property of the Trust which secures that indemnity; and the party has not agreed to limit or exclude, and has not committed any breach of trust or done or omitted to do anything which has prejudiced or limited, its right of indemnity or equitable lien.

(f)

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ACKNOWLEDGMENTS BY EMPLOYEE 12.1 The Employee by its execution of this Deed acknowledges the following: (a) In entering into the Lease and this Deed the Employee has either sought financial, taxation and legal advice in relation to those documents or, if advice has not been sought, the Employee acknowledges that the Employee has a sufficient understanding of the relevant risks and issues to make such advice unnecessary; The Employee has not relied on any advice or other information provided by the Employer or the Finance Company in deciding whether to execute this Deed of Novation and acknowledges that the Employer has recommended that advice in relation to the Lease and the Deed be sought by the Employee. The Employer acknowledges that the Employee has not been required to enter into the Lease or the Deed but has entered into those agreements voluntarily.

(b)

(c)

12.2 The Employee remains liable for the payment of any Residual Obligation under the Novated Vehicle Lease and acknowledges that such a payment may exceed the amount for which the Vehicle can be sold. 12.3 The Employee acknowledges that the Employer has not given the Employee any assurance that the Employee's employment will continue until the termination of the term of the Novated Vehicle Lease. 13 INCONSISTENCIES BETWEEN DEED AND NOVATED VEHICLE LEASE If there is any inconsistency between the terms of this Deed and the terms of the Novated Vehicle Lease then the terms of this Deed shall apply.

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EXECUTED AS A DEED:

Signed and delivered by the Employee in the presence of:

) ) ) Signature of Employee

Witness:

Witness name - Print

Signed, sealed and delivered by the Employer

) ) ) ) Signed on behalf of Employer

Witness:

Witness name - Print

Signed, sealed and delivered by the Finance Company

) ) ) Signed on behalf of Finance Company

Witness:

Witness name - Print