Salary Sacrifice & taxsaver tickets: Impact on pension, insurance etc

Does anyone know why (apart from the fact that someone in the Department of Finance thought it would be a good way to limit uptake) you have to forego part of your salary in order to avail of tax breaks on commuter tickets ?

I don't mean you have to forego salary by paying for it (that is taken for granted), but I mean is that you have to reduce your reckonable income or some other significant tax term.

Assume I am on €50,000 and my taxsaver ticket costs €1,000. From a P60 point of view I will have earned €49,000. I have foregone 2% of my salary. Big deal, some people might say. My concern is that a number of things are based on this reduced salary level - like pension contributions, bonuses, etc . . .

1% or 2% of salary might not seem like a lot, but I am a little concerned that the cumulative effect over the next 30 years to retirement *could* be significant.

So, as above, does anyone know why this particular method was chosen by Finance/Revenue and does anyone have a view as to whether the cumulative effects on things like pension provision might be significant over time ?

Cheers,

z

Re: Foregoing salary as part of taxsaver tickets

As far as I am concerned its much like paying pension AVCs, you still 'earn' Eu50,000 but now have additional non-taxable deduction prior to taxation.
It's made no difference to my pension contributions as they are based on my salary, not my take home pay.
I've taken up this scheme at work and personally think it great, i've gone from EU178 per month after tax, to Eu38 per week before tax... so net income means i'm 'up' about Eu16 per week (ok, the figures given are approximates, my brain isn't up to doing all the sums).

Re: Foregoing salary as part of taxsaver tickets

If you earn €50k, your P60 will say that you earned €50k as far as I am aware (I have used the Taxsaver scheme for the past 4 years). My bonus and pension are based on gross salary.

Re: Foregoing salary as part of taxsaver tickets

Your P60 will show gross salary net of items you have received tax relief on, for instance employee contributions to a company pension scheme. This shouldn't effect situations where benefits are based on gross salary as your gross salary is whatever is agreed with you employer in advance, the gross salary is not determined by the P60 figure which is an end of year tax document.

Re: Foregoing salary as part of taxsaver tickets

I'll have to dig out the documentation on this - I am pretty sure they were flagging up the (minor) adverse impact of this.

I am happy to accept everyones info above, but if I can find the quote I will post it here again.

Cheers,

z

Sorry to drag up a 5 year old post but my company is reducing benefits when you take up the taxsaver travel offer. i.e. your employer pension contribution is based on your salary less the amount paid to the travel company. Similarly it reduces your income protection and company life assurance.

I really think they've got this one wrong but can't find any documentation on the Revenue site. Anyone seen anything on this?

EMPLOYER - www.taxsaver.ie

How Taxsaver works
Your employees can achieve significant savings on the cost of commuting when they receive their Annual or Monthly ticket as part of their remuneration package.

This system benefits everyone as your company will also save 10.75% on Employer PRSI when you make this deduction from salary payments.

There are several ways you can assist your employees in receiving a Taxsaver Ticket:
Salary sacrifice – Deduct the cost of the ticket from their gross salary.
In place of a cash bonus – Deduct the cost of the ticket from their bonus.
Addition to salary – Provide the ticket as an addition to their current salary.

Salary sacrifice
Employees can reduce their gross salary by the cost of their chosen ticket and will therefore reduce the taxable element of their salary:
Revenue terms and conditions


There must be a bone fide and enforceable alteration to the terms and conditions of employment (exercising a choice of benefit instead of salary).

• The alteration must not be retrospective and must be evidenced in writing. A sample alteration form is available to download here.
• There must be no entitlement to exchange the benefit for cash.
• The choice exercised (i.e. benefit instead of cash) cannot be made more frequently than once a year and then only with the consent of the employer.

The full text of the Revenue Commissioners Tax Briefing document on taxsaver tickets can be viewed by clicking on the Revenue link below.
http://www.revenue.ie/en/tax/it/leaflets/benefit-in-kind/passes.html

In place of cash bonus
Employees can reduce their cash bonus and receive a taxsaver ticket to the same value.

Addition to salary

This is a popular option for employers involved in a staff retention process. It is also a great way of reducing the number of car parking spaces needed.

Thanks for that, so in saying it's a salary sacrifice it actually means your gross salary is reduced for pension contributions?

This really is a win win situation for the employers.

Ps: it really is a lot more advantageous for an employee to have the payment taken from their bonus if they get one

My company gives it as an addition to salary so it doesn't impact on pension contributions etc. Guess it is up to each company.