Smart strategies to attract talent and stay compliant with tax laws
In today’s tight employment market, offering a competitive salary isn’t always enough to keep great people on your team. Australian businesses – especially small to medium enterprises – are under increasing pressure to build compensation packages that go beyond the basics.
At Lemonade Beach Accounting, we help business owners design employee benefit strategies that boost retention, support staff wellbeing, and align with tax regulations. Here’s how to build an effective compensation plan that works for your team and your bottom line.
Why Employee Benefits Matter More Than Ever
Employee benefits aren’t just a “nice to have” – they’re fast becoming a key part of job decisions. A well-rounded compensation package can:
- Improve employee engagement and loyalty
- Set your business apart in a competitive industry
- Reduce turnover and recruitment costs
- Foster a culture that attracts values-aligned talent
Whether you’re scaling up or simply trying to hold onto your best people, structuring benefits and pay correctly can make all the difference.
Common Employee Benefits
Employee benefits vary depending on the size and structure of the business, but commonly include:
- Additional superannuation contributions
- Novated vehicle leases
- Health and wellness initiatives (e.g. gym and Employee Assistance Programs like counselling)
- Work-from-home or flexible hours
- Training and professional development support
- Technology or equipment (e.g. phones, laptops)
- Paid birthday leave or wellbeing days
Importantly, not all benefits are taxed equally – some attract Fringe Benefits Tax (FBT), which you’ll need to factor into your payroll strategy.
Understanding Fringe Benefits Tax (FBT)
FBT is a tax paid by employers on certain non-cash benefits provided to employees. It’s separate from income tax and can be a surprise cost if not planned for correctly.
Here’s a quick snapshot of common fringe benefits and their FBT treatment:
| Benefit Type | FBT Status | Details |
| Laptop for work use | Often exempt | Limited to one per year, per employee |
| Private use of a company car | FBT applies | Can be a significant annual cost |
| Gym memberships | FBT applies | Unless provided on-site (i.e. employers premises) |
| Business training/courses | Exempt | Must be directly related to current role |
| Meal entertainment | FBT applies | Complex rules depending on event and location |
If you’re unsure how a benefit is taxed, it’s best to speak with your accountant before finalising any employee agreements.
What Is Salary Packaging?
Salary packaging (or salary sacrificing) allows employees to receive part of their income in the form of approved benefits – potentially reducing their taxable income and increasing their take-home value.
Popular salary packaging options in Australia include:
- Extra superannuation contributions
- Novated leases
- Portable devices used for work
- Remote area housing (in certain cases)
While this can be a win-win, it’s essential to report and structure salary packages correctly. Incorrect reporting or missing FBT obligations can trigger ATO penalties and create payroll headaches.
Five Tips for Structuring a Smarter Compensation Package
- Benchmark Against Industry Standards
Use tools like SEEK or Fair Work’s wage guides to make sure your pay and benefits are competitive in your sector. - Choose Benefits with Strategic Value
Rather than offering everything, focus on benefits that matter to your team – flexibility, development, and wellbeing often rank high. - Review Your FBT Exposure Annually
Some benefits may be FBT-exempt or attract reduced rates. An annual review helps you stay compliant and control costs. We recommend all employers register and lodge FBT returns annually. - Document Salary Packaging Arrangements Clearly
Ensure agreements are in writing, understood by both parties, and updated when roles or tax rules change. - Get Expert Advice Early
Don’t wait until the end of the financial year. Talk to your accountant before implementing any new benefit strategy.
Final Thoughts: Compensation as a Business Growth Tool
Attracting and retaining great staff doesn’t have to mean blowing your budget. With the right structure, your compensation plan can support both your people and your profitability. The key is to design it thoughtfully – balancing rewards, compliance, and sustainability.
At Lemonade Beach Accounting, we work with Australian business owners to review and refine their compensation structures. Whether you’re exploring salary packaging, evaluating fringe benefits, or looking to scale your team, we can help you do it with confidence.
Need a second opinion on your employee benefit setup?
Chat with the team at Lemonade Beach Accounting – we make tax compliance and payroll strategy simple, strategic, and stress-free.
