What you need to know about the salary cap and how it affects you.
When to ask your employer for a salary cap to help you avoid the bill.
What’s the salary caps?
The salary cap is a salary threshold that applies to all employees in a business or organisation.
It is set at 25 per cent of the salary for a person with a Bachelor of Business Administration degree, and 30 per cent for a Doctor of Business, Bachelor of Pharmacy, Bachelor or Associate of Science degree.
The salary threshold is a percentage of your salary.
For example, a $100,000-a-year employee earning $50,000 a year will be entitled to a $150,000 salary cap.
Employers pay for their employees’ salary through payroll deductions and other tax concessions.
If you receive a salary payment from an employer who makes the payment on behalf of the company, it is a deduction.
If you do not, you can still claim the full amount.
How do I claim the salary?
You can claim the amount you receive from an employee on your income tax return using the PAYE Tax Calculator.
This calculator works for income tax returns filed after June 20, 2018.
You can also claim the tax credit if you receive income from a business, which can be up to $30,000, from an individual or business trust or partnership, up to the maximum $30 in the amount claimed.
In some cases, an employee can claim a credit for up to 15 per cent in their total salary.
For more information, see PAYE 2018.
What is the tax-free amount for employees?
The Tax Free Amount is a tax credit that can be claimed for eligible employees.
It is available to: employees who are eligible to claim the deduction (such as full-time staff, part-time employees, and employees on a salary reduction plan); and employees who receive pay from a company or partnership that pays the employee at least a minimum wage of $20,000 per annum, or a minimum of $10,000 in any calendar year, and is not subject to the payroll deduction.
The Tax-Free Amount is calculated by adding the employer’s eligible employees’ tax-exempt income (up to $15,000) to their eligible employees taxable income (if any) plus any payroll deductions.
The amount you can claim is dependent on the number of eligible employees, the amount of the employee’s salary and the amount paid to the employee.
For the 2017 tax year, the Tax Free Level was $1.75 million.
For 2018, it was $2.15 million.
The tax-saving benefit for employees on salary reduction plans and salary reduction payers is that the employer is required to contribute a tax-qualified amount of $5,000 towards the employee pay.
The maximum amount of tax-related deduction that an employer can claim on a full-year salary is $2,400 for employees and $2 to $4,500 for employees working from home.
To learn more about the tax benefits of salary reduction or salary reduction employees, see the 2017-18 Income Tax Guide.