By Colm Rapple
A Dublin Bus Travelwide monthly bus ticket normally costs €98. It’s good value at that, providing unlimited travel on the City’s bus network. But it is possible to get it for as little as €48.02. At less than half price, that’s a snip.
Alternatively it’s possible to get an annual Dublin Bus Travelwide ticket for €480.20. It normally costs €980. The same type of reductions are available on monthly and annual Iarnród Éireann and Bus Éireann tickets and on the very popular combined tickets which can also get unlimited access to Luas services.
To qualify for these deals, all you need to do is get the support of your employer and you don’t have to ask for any favours -- the opposite, in fact. You’ll actually be doing your employer a favour in the form of a cash saving of up €105.35. That’s what you employer can get for assisting you to buy one of those half-price annual Dublin Bus tickets.
That may sound too good to be true. But it isn’t. It’s all thanks to a special tax concession that has become even more attractive since the introduction of the income levy. The savings outlined above are based on a private sector worker paying tax at the top rate of 41% and the 2% income levy payable by those earning up to €75,036 this year.
The benefit is somewhat less, but still significant, for those paying tax at the standard rate and/or for those public sector workers who pay PRSI at a lower rate. The saving to employers comes by way of a cut in their Employer PRSI liabilities.
The travel pass doesn’t have to be used only for work. Indeed many of the passes issued by Dublin Bus, Bus Éireann and Iarnród Éireann entitle the holder to unlimited travel.
For instance an annual bus and rail pass for the Dublin area allows the holder unlimited travel for a full year on all Dublin Bus scheduled services and all Dublin suburban rail, Arrow and DART services between Balbriggan, Kilcoole, Hazelhatch and Maynooth. That includes Airlink, Nitelink and Xpresso but excludes Tours, Special Events and Private Contract services.
This pass costs €1,190 a year but it does, of course, buy travel services worth well in excess of that. And when the tax saving is taken into account it costs a lot less.
So how does it work?
Most benefits provided by an employer to an employee are considered taxable by the Revenue Commissioners. But certain bus and rail travel passes are exempt and can be provided tax free. The passes can be issued by the CIE subsidiaries, Bus Éireann, Iarnród Éireann and Dublin Bus and also by some private transport operators. They must cover at least a month’s travel.
That relief from benefit-in-kind tax can be very valuable.
If the individual in the example above took €980 in the form of extra wages or some other taxable benefit, tax at 41% would take €401.80 of it. PRSI at 4% would take a further €39.20. And combined the 2% Health Levy and the 2% Income Levy would take the same again. So the €980 in extra gross pay would translate into take-home pay of only €499.80.
The employer would also be liable for €105.35 Employer PRSI (10.75% of €980).
Alternatively the employee can get the full benefit of the €980 in the form of a bus pass and the employer saves that €105.35 because the benefit is not only exempt from benefit-in-kind tax but since it isn’t treated as wages, there is no liability for Employer PRSI either. Yet the cost is an allowable expense of the business.
In this straitened times this can be a way of providing the maximum benefit to employees at the least cost to the employer. But there can also be a benefit for workers who agree to take a cut in pay to compensate the employer for buying the pass. The sums work out the same as in the example above. In the case of the annual pass it’s a choice between €499.80 in take-home pay or a pass worth €980.
For someone paying tax at 20% but subject to full rate PRSI and the 2% income levy, the potential saving on a €980 pass is €274.40.
The decision to take a cut in pay in return for a travel pass must be made in the context of a formal change in the workers’ terms and conditions of employment. The agreement must be in writing and it cannot be retrospective. There can’t be any arrangement to sell the travel pass back for cash. And the decision to take the pay cut must be binding for at least a year and only changed with the consent of the employer.