How advantage salary packaging changes your fortnightly take-home pay

What determines your fortnightly take-home pay

Your take-home pay is the amount that lands in your bank account after your employer deducts income tax and the Medicare levy. For 2026–27, the tax brackets are:

• $0 – $18,200: Nil tax
• $18,201 – $45,000: 15 cents for each dollar over $18,200
• $45,001 – $135,000: $4,020 plus 30 cents per dollar over $45,000
• $135,001 – $190,000: $31,020 plus 37 cents per dollar over $135,000
• Over $190,000: $51,370 plus 45 cents per dollar over $190,000

You also get the Low Income Tax Offset (LITO) if your taxable income is under $66,667. The Medicare levy adds 2% on top, but if you earn below $28,011 you pay nothing, and between $28,011 and $35,013 you pay a reduced rate. These thresholds are the latest published single-person figures from the ATO.

Your employer withholds tax each pay period using the ATO's tax tables. The tables were updated from 1 July 2026 to reflect the tax cuts and Medicare levy adjustments. For a full breakdown of how tax and Medicare affect your pay, see our Tax and Medicare guide.

The role of super in your pay package

From 1 July 2026, your employer must contribute super at 12% of your ordinary time earnings, up to a maximum contribution base of $270,830 per year. This super is paid on top of your salary, not deducted from it. However, if you salary-sacrifice into super, those contributions are treated as employer contributions and count toward your concessional cap of $32,500. The Super page explains how this affects your overall remuneration.

How advantage salary packaging works

Salary packaging (also called salary sacrificing) is an arrangement where you and your employer agree to reduce your pre-tax salary in exchange for benefits of similar value. The Australian Taxation Office states that this reduces your taxable income, so you may pay less tax. There is no restriction on the types of benefits you can package, but your employer may have to pay fringe benefits tax (FBT) on some items.

For example, the ATO illustrates a scenario with Sam earning $65,000. Without packaging, Sam's net disposable income is $41,912. By packaging a car worth $17,353 without employee contributions, net disposable income drops slightly to $41,612. But with an employee contribution of $7,000, net disposable income rises to $43,593. This shows that careful structuring can make advantage salary packaging worthwhile.

adds that you can package benefits like cars, computers, childcare, health insurance, and school fees. The key is to arrange the package before you earn the income. If you don't, the benefits may be treated as assessable income.

Impact on your fortnightly take-home

When you salary package, your employer reduces the taxable income used to calculate withholding. This means less tax and Medicare levy are taken out each fortnight. However, you may need to make employee contributions (post-tax) to reduce your employer's FBT liability. Those contributions come out of your net pay, so the net effect depends on the numbers.

For super contributions, salary sacrificing can be tax-effective because the contributions are taxed at 15% inside super, which is lower than most marginal rates. But remember the $32,500 cap – if you exceed it, you pay extra tax.

Things to watch out for

Salary packaging can affect other parts of your finances. The ATO warns it may impact the Medicare levy surcharge, study loan repayments, tax offsets, child support, and government benefits. Also, from 1 April 2027, work-related items provided through salary sacrifice will no longer be FBT-exempt.

Before you start, check what your employer offers and whether the benefits are tax-effective for your situation. Use our Salary packaging page for more details.

Putting it all together

Your fortnightly take-home pay is shaped by the tax brackets, the Medicare levy, and your super arrangements. Adding advantage salary packaging can reduce your taxable income and boost your net pay, but only if the benefits and contributions are structured correctly. The ATO and Moneysmart provide clear examples to help you compare scenarios.

For a personalised estimate, try our Clearance tool or review the Benchmarks for typical pay rates. Remember, this is not a tax assessment – always consult a qualified adviser for your specific situation.