Elected Members and sacrifice arrangements
11 December 2007
The ATO released its much awaited Decision on the effect of elected members purporting to enter into salary sacrifice arrangements.
Amounts paid by a local government council in the form of contributions to a complying superannuation fund that are assessable to the fund under section 295-160 of the ITAA 1997, do not represent assessable income of the councillor for the purposes of the ITAA 1997.
It is now possible for elected members to enter into such agreements provided that the agreement satisfies the conditions required to make salary sacrifice agreements by employees, effective.
The effect of such an agreement is as follows:
1. The income sacrificed will not be assessable in the hands of the elected member;
2. There will be no FBT implications as the elected members are still not regarded as employees of Council;
3. The elected member is not entitled to income tax deductions in respect of the contributions;
4. This ruling does not apply to ‘benefits’ other than superannuation. For instance, this ruling does NOT provide that an elected member can sacrifice an amount of sitting fees for the use of a car.