Thanks Ian for this really useful and well considered and sourced response. I have - a long, long time ago in a career far, far away - managed a process of establishing and providing salary sacrifice benefits to staff of a charity I was Finance Manager for but the distinction was the organisation was also a PBI. The benefits were very tangible and staff loved it. Later I looked into this for an organisation that was a charity but not a PBI and came to the same conclusion as Ian. The benefits were negligible and the admin very onerous. PAC as Lynda points out is not a PBI and so does not have FBT exemption but does have FBT rebate status according to the details under our ABN so what Ian suggests below holds true. So I agree with the overall assessment that this could become a burden to the organisation for not a great deal of benefit. Thanks John John Glenn (He/Him) / / / Director Hey Dowling john@heydowling.com.au<mailto:john@heydowling.com.au> | +61 416144179 heydowling.com.au<http://www.heydowling.com.au/> - - - I live and work on Kaurna land. Always was, always will be. [HD_LOGO_HORIZONTAL_BLACK.jpg] From: Lynda de Koning via PAC Australia Board <board@ask.paca.org.au> Date: Thursday, 9 April 2026 at 9:23 am To: Ian English <ian@staijservices.com.au>, Peter Ross via PAC Australia Board <board@ask.paca.org.au> Subject: [PAC Australia Board] Re: Salary Sacrifice expertise and experience Hi Ian, Appreciate the information and advice. Katherine and I will discuss this further, but if anyone else has any thoughts please share. All the best, Lynda Lynda de Koning (she/her) General Manager | PAC Australia | +61 (0) 438 860 020 | paca.org.au<https://paca.org.au/> Peramangk / South Australia GMT +9.5 [Image]<https://www.facebook.com/pacaustralia> [Image] <https://www.linkedin.com/company/performing-arts-connections-australia/?orig...> [Image] <https://www.instagram.com/pacaustralia/> [Image] <https://paca.org.au/resources/touringcharter/> [Image] <https://paca.org.au/membership/join-pac-australia/> [Image] <https://paca.us15.list-manage.com/subscribe?u=17268242394b2278ede3a3716&id=d...> ________________________________ From: Ian English <ian@staijservices.com.au> Sent: Wednesday, 8 April 2026 09:46 To: Lynda de Koning <lynda@paca.org.au>; Peter Ross via PAC Australia Board <board@ask.paca.org.au> Subject: Re: Salary Sacrifice expertise and experience Morning I delved into some research and discussed with a couple of my contacts re this, and have summarised all info provided back to me as follows. (And using some guided input from my contacts so forgive the third party references). The assessment of the FBT is is largely accurate, but there is one critical "middle ground" concession may have been missed: the FBT Rebate. As a registered charity that is not a Public Benevolent Institution (PBI), PACA likely falls into the FBT Rebatable Employer category. This significantly changes the cost-benefit math for staff. Summary of Advice The reality PBI status is rare. You are likely correct that PACA is not a PBI, but you are likely a "Rebatable Charity." FBT is a "Penalty Tax." Without a concession, FBT on a mortgage ($100 benefit) costs the employer ~$97 extra. Admin will be the real killer. Small NFPs often find the audit and compliance costs outweigh the staff morale boost. The Missing Piece: The FBT Rebate While you don't get a full exemption like a PBI, as a registered charity endorsed for income tax exemption, you are likely entitled to a 47% FBT Rebate. * How it works: You still calculate and pay FBT, but the ATO gives you a 47% discount on the total tax bill. * The Cap: This applies to the first $30,000 of "grossed-up" taxable value per employee. * The Catch: Even with a 47% rebate, providing a mortgage benefit is still "expensive" compared to a PBI. For a standard employer (non-PBI), the employee usually only sees a benefit if they are in the highest tax bracket (45%). Relevant comments to the items raised and requested for clarification "Employee pays the FBT with after-tax funds" This is called an Employee Contribution. It is the most common way to "zero out" the FBT liability for the employer. * The Math: If the employee pays $1 of after-tax money, it reduces the taxable value of the fringe benefit by $1. * The Strategy: For a mortgage, the employee would sacrifice some pre-tax salary, but they would also have to make an after-tax contribution to ensure PACA doesn't get hit with a tax bill. For many employees, the "math" results in a very negligible gain once you factor in your admin fees. "Additional financial management and audit costs" Implementing this in-house is a significant burden: * FBT Returns: You must lodge a return every year (due May 21). * Reportable Fringe Benefits (RFBA): These must appear on the employee's Income statement. This affects their HECS/HELP repayments, Child Support, and Medicare Levy Surcharge. * Audit Risk: Errors in gross-up calculations are a common ATO audit trigger. Suggestions/recommendations If PACA wants to provide this incentive without the "headache," consider these possible steps: A. Outsource to a Salary Packaging Provider Do not run this through your own payroll software. Companies like Maxxia, Smartsalary, or AccessPay specialize in NFPs. * Benefit: They handle the FBT calculations, substantiation (checking mortgage statements), and reporting. * Cost: They charge the employee a fortnightly fee (usually $10–$20). This keeps PACA’s overhead near zero. This may or may not be something to consider but does add costs to be balanced against contractor time/costs. B. Start with "FBT-Exempt" Items Only Instead of mortgages (which attract FBT), offer "otherwise deductible" items or exempt items: * Work-related items: Laptops, mobile phones, or professional memberships. * Superannuation: You already do this; it’s the most "bang for buck" for the employee with zero FBT risk. C. Use a "Cost-Neutral" Policy If you proceed, your policy should state that the arrangement must be cost-neutral to PACA. This means the employee covers: * The FBT liability (via the rebate and their own contributions). * The external provider's admin fee. * Any increase in WorkCover premiums (since these are often based on "total remuneration" including fringe benefits) Final thoughts/view after my discussions and “requests for help” from more informed people than me. Unless PACA is willing to engage an external packaging provider, we should not offer mortgage salary sacrifice. The risk of a clerical error by a part-time bookkeeper resulting in an ATO penalty is high, and the actual "cash in pocket" benefit for an employee at a non-PBI charity is often too small to justify the paperwork. While PACA should work to provide optimum employment standards and conditions, they have to be balanced with the reality of cost and overhead where our funding sources are limited and always under pressure. Hope it helps Ian Ian English Consulting services and assistance for general business process, stage, screen, attraction, venue, events and more. Mobile +61 (0) 438 840 100 Email ian@staijservices.com.au<mailto:ian@staijservices.com.au> Web www.staijservices.com.au<http://www.staijservices.com.au/> Linkedin https://www.linkedin.com/in/ianenglishstaijservices The information in this email is for the use of the intended recipient only and may contain confidential information. If you have received this email in error, please notify the sender by return email and immediately delete the email and destroy all copies. You must not use, disclose, disseminate, print or copy any part of this message if you are not the intended recipient. ________________________________ From: Lynda de Koning via PAC Australia Board <board@ask.paca.org.au> Sent: Tuesday, April 7, 2026 4:48:22 PM To: Peter Ross via PAC Australia Board <board@ask.paca.org.au> Subject: [PAC Australia Board] Salary Sacrifice expertise and experience Good afternoon members, I hope this week is treating you well. Seeking your expertise and experience with salary sacrifice for staff to inform our initial scoping. If it's something you could possibly assist with, please see details following (otherwise feel free to move on!). We have received a request from a staff member to salary sacrifice their mortgage payments. We're conscious that salary sacrifice can be a significant incentive for staff which we would like to make available to the team in a comprehensive manner should we implement, but we'd appreciate any experience and advice. PACA currently has salary sacrifice in place for Superannuation only which does not attract FBT tax. Maria and I have conducted some initial research that suggests that: * Salary sacrifice payments such a mortgage and car payments attract FBT tax, which is the employer's responsibility with the ATO. * It is possible for the employee and employer to enter into an agreement where the employee part or fully pays the FBT component to the employer with after tax funds (in which case the employee should consider the cost benefits of their request). * PACA is a NFP and registered charity, but we do not have an FBT exemption in place. * FBT exemptions (to a capped amount) only apply for public benevolent institutions and health promotion charities, registered by the Australian Charities and endorsed by the ATO. As such, I don't believe PACA would be eligible. * PACA will incur additional financial management (time) and audit costs in delivering a salary sacrifice program including FBT. Are any members able to provide any advice about the above information, your experience or relevant policies? Many thanks for your assistance, Lynda Lynda de Koning (she/her) General Manager | PAC Australia | +61 (0) 438 860 020 | paca.org.au<https://paca.org.au/> Peramangk / South Australia GMT +9.5 [X]<http://www.apax.org.au/> I gratefully acknowledge the Peramangk people, on whose lands I live and work, and recognise their continuing connection to Country. I pay my respects to Aboriginal and Torres Strait Islander cultures, and to Elders passed and present. Always was, always will be. If this email arrives in your inbox out of hours, I don’t expect you to read, action or reply to it outside of your working hours.
