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Financial Accounting
Salary sacrifice scheme
This topic covers:
- What is Salary Sacrifice?
- Rules and eligibility
- Choice of vehicles
- Purchase of vehicle
- Initial calculations
- Approval of purchase
- Accounting procedure
- Disposal of vehicles
- Link to related information
What is Salary Sacrifice ?
A salary sacrifice scheme is an arrangement where an employer gives employees the choice of alternative benefits in lieu of part of their salaries. At the University, the scheme is mainly applied to motor vehicles.
The University's salary sacrifice scheme is a user-pays system.
Rules and eligibility
Section 12.03 of the Personnel Management Handbook gives the rules applicable for salary sacrifice for motor vehicles. It also defines eligible employees and provides information about the procedures for obtaining a salary-sacrifice vehicle and the accounting procedures for the scheme. Eligible employees can contact the Manager, Financial Accounting, x7207, or the Director, Financial Services, x7369 for further information.
Choice of vehicles
Vehicles available are listed on the NSW State Government Contact #653 – Purchase of Motor Vehicle Pricing. A copy of the latest list can be obtained from Purchasing section, x7255, or Manager, Financial Accounting, x7207.
Purchase of vehicle
If you are eligible for the scheme and want a salary sacrifice vehicle, make your requests through the Office of Financial Services. You may approach the dealer of your choice and obtain a quotation for your choice of vehicle with the accessories applicable under the State contract. Send the quotation to the Manager, Financial Accounting for calculation of the indicative amount to be sacrificed.
Initial calculations
The OFS calculates a regular salary deduction based on the purchase figures and the employee's estimate of expected annual mileage. The calculations include fixed costs (for example, registration, CTP insurance) and estimates of variable costs (for example, interest, running costs, Fringe Benefits Tax). The estimation of variable costs involves the number of kilometres travelled by the motor vehicle. You should estimate the number of kilometres that the vehicle will travel on a realistic basis so that the deduction can be calculated correctly.
Approval of purchase
After the eligible employee agrees to the estimated deduction, the OFS seeks Personnel Office approval and the raises a requisition to purchase the vehicle.
Accounting procedure
The Office of Financial Services sets up a general ledger account for each salary sacrifice vehicle. All actual running costs paid or reimbursed by the University are recorded in the account. The salary deductions are also recorded in the account.
Disposal of vehicles
The University normally keeps salary sacrifice motor vehicles for 2 years or 40,000 kilometres, whichever come first. When the University disposes of the vehicle, the OFS adjusts the employee's pre-tax pay by the amount of the vehicle's general ledger account balance.