Tax Effectively Reward And Retain
Your Best Employees

In the Australian Financial Review on 22 April 2008, Kate McCallum from Multiforte discussed the options for small and medium sized enterprises to tax effectively reward and retain their best employees as the skills shortage and demand for good staff intensifies.

Here is an excerpt from the article, “Financial advice a perk with a difference”:

Kate McCallum, an authorised representative and principal of Multiforte Financial Services, said offering financial advice as an employee benefit is attractive for the owners of SMEs because they don't have deep pockets to fund ongoing salary increases, but need a creative way to provide significant and sustained value.

She said: ``Financial advice has the potential to offer a benefit that could be worth hundreds of thousands of dollars for employees. It can deliver an immediate benefit and sustained value, unlike strings-attached benefits like employee share schemes.''

Ms McCallum said there are three typical approaches that an SME owner can take in offering financial advice to help attract and retain staff…

Self managed superannuation enables the whole family to be members of the same fund. Generally that is difficult at best with other types of superannuation funds, such as corporate funds.

By having family members and their super assets in the one flexible superannuation fund that is purpose built for you and your family, it makes matters so much easier when considering your own needs and key matters such as estate planning.

1. Employees might be offered a financial health check or review of their finances which will identify ways in which they can improve their financial health. The business cost for the health check is likely to be around $100 per employee. Employees can then elect to salary sacrifice fees for ongoing advice. This can be tax-effective where the total taxable value of the fringe benefits received by the employee is less than $2,000.
2. The business owner can fund, either fully or partially, an initial financial strategy and plan for key staff…  For most people, this is worth between $4,000 and $8,000.  After they receive the initial financial advice, each individual can then decide if they would like to receive advice on an annual basis. The fees for ongoing advice may be tax-deductible to the employee. However, as the financial planning advice is a taxable fringe benefit, the employer may be subject to fringe benefits tax where the cost per employee exceeds $2,000.
3. The business owner can provide both the initial and the ongoing advice for the employee. Ongoing advice fees are around 75 per cent of the initial fee. Assuming the cost is otherwise deductible to the employee, there is no fringe benefit tax where the employer funds the ongoing advice component.

Mr Hayes [of Hayes Knight] said a business owner offering financial advice to help retain and attract staff must make it clear that any advice provided and any action taken as a result of advice being given will be a matter between the employee and the financial planner. The business owner must also make sure the employee gets tax advice where appropriate.

For more information on how small to medium businesses can benefit from financial advice to reward and retain employees, simply call or email Multiforte.