Salary packaging: what you actually keep

Salary packaging and salary sacrifice are the same thing

The ATO calls it a salary sacrifice arrangement, "also known as salary packaging or total remuneration packaging" (ATO). You agree with your employer to give up part of your salary before tax in exchange for benefits of a similar value. The tax you save depends on what you package and on who employs you.

• Super. Anyone whose employer agrees can sacrifice salary into super. It is taxed at 15% in the fund instead of at your marginal rate.
• Not-for-profit packaging. Charities that are public benevolent institutions, health promotion charities, public and not-for-profit hospitals and ambulance services can pay some of your bills before tax, free of fringe benefits tax, up to a cap.
• Cars (novated leases). A separate set of rules, not covered on this page.

Packaging $10,000 into super, salary by salary

On $120,000, the $10,000 you sacrifice costs your take-home $6,800, about $262 a fortnight, and lands in super as $8,500. The other $3,200 would have gone in income tax and Medicare levy. On $45,000 the same sacrifice costs $7,924: at lower salaries the 15% super tax leaves less of a saving.

Your employer's 12% super guarantee is still worked out on your full salary, as if you had sacrificed nothing (ATO). Everything going into super before tax, the 12% included, counts towards the $32,500 concessional cap (ATO): on $180,000 the 12% is already $21,600, which leaves $10,900 of room.

Above $250,000: Division 293

If your income plus your concessional contributions comes to more than $250,000, the ATO charges a further 15% on the lesser of your contributions and the amount over the threshold (ATO). On a $240,000 salary, the 12% super guarantee adds $28,800 of contributions, so the total is $268,800 and Division 293 tax is $2,820.

Salary sacrifice doesn't get you under the threshold: each dollar you sacrifice leaves your income and joins your contributions, so the total stays the same. Sacrificing $3,000 on that salary leaves Division 293 tax at $2,820. The ATO sends the bill after you lodge, and you can pay it yourself or from super.

Not-for-profit packaging: the caps

The caps are on the grossed-up value of the benefits (ATO: FBT rates and thresholds). Where your employer can't claim a GST credit for a benefit, its value is multiplied by 1.8868 (the Type 2 rate), so a $30,000 cap holds about $15,900 of benefits a year, or $612 a fortnight. Where the employer can claim a GST credit, the higher Type 1 rate of 2.0802 applies and less fits.

Up to the cap, these benefits are exempt from fringe benefits tax (ATO: FBT-exempt organisations). Meal entertainment has its own $5,000 grossed-up cap on top (ATO). Other charities, religious institutions and community not-for-profits are usually "rebatable employers" instead: they get a 47% rebate on the FBT for the first $30,000 rather than an exemption (ATO), so packaging is worth less there. This page doesn't model rebatable employers.

What not-for-profit packaging is worth, salary by salary

Take-home here includes the packaged benefits. The money still pays your rent, mortgage or bills; it just never passes through income tax. On $70,000 at a charity, packaging the full $15,900 takes your taxable income to $54,100, and what you keep rises from $57,080 to $62,356: $5,276 a year, $203 a fortnight.

The catch: reportable fringe benefits

Packaged benefits appear on your income statement as reportable fringe benefits, at their grossed-up value (ATO). $15,900 of packaging shows as $30,000. That figure isn't taxed, but it counts in income tests:

• HELP repayments. Repayment income includes reportable fringe benefits (ATO). On $70,000 with a HELP debt, the repayment goes from $71 to $2,186 once you package the full $15,900. You still come out ahead, by $3,161 a year instead of $5,276.
• Medicare levy surcharge. Without private hospital cover, the surcharge tier is set by income including reportable fringe benefits, and the surcharge is charged on them too (ATO). On $100,000 with no cover the surcharge is $0; with full charity packaging it becomes $1,141.
• Division 293. Reportable fringe benefits count in Division 293 income (ATO).

What KeptOffer assumes

• Packaged benefits are Type 2 (no GST credit for your employer), you have no other fringe benefits, and you work for one employer.
• Packaging above the cap is treated as salary. In practice your employer would pay FBT on the excess and usually pass the cost back to you.
• Rebatable employers, meal entertainment, novated leases and the 15% tax inside super are not part of the take-home figures. The super tables show the 15% separately.
• Super guarantee is worked out on your full salary before packaging. Check your contract if your employer does it differently.
• FBT years run from 1 April to 31 March. The caps and gross-up rate shown are for the FBT year ending 31 March 2027, which is reported for the 2026–27 income year.