Best salary packaging Australia: How it changes your take-home pay and super

How salary packaging changes your fortnightly pay

Salary packaging — also called salary sacrifice — lets you swap some of your pre-tax salary for benefits like a car, laptop, or extra super contributions. Because your taxable income drops, you pay less income tax and Medicare levy. But the effect on your take-home pay depends on your tax bracket, the type of benefit, and whether your employer passes on fringe benefits tax (FBT).

The basics of salary packaging

Under a salary packaging arrangement, you and your employer agree that you will receive less salary before tax, and in return your employer pays for certain benefits of similar value. The Australian Taxation Office explains that this reduces your taxable income, meaning you may pay less tax. There is no restriction on the types of benefits you can include, as long as they form part of your remuneration. Common benefits include cars, electronic devices, and super contributions. Salary packaging can be arranged for most employees, but your employer must offer it.

How tax brackets affect your take-home

Your marginal tax rate determines how much you save from salary packaging. For the 2026–27 income year, the tax rates are:

• Up to $18,200: Nil
• $18,201 to $45,000: 15c per $1 over $18,200
• $45,001 to $135,000: $4,020 plus 30c per $1 over $45,000
• $135,001 to $190,000: $31,020 plus 37c per $1 over $135,000
• Over $190,000: $51,370 plus 45c per $1 over $190,000

If you salary package a benefit worth $15,000, your taxable income drops by that amount. For someone earning $100,000, that could move them from the 30% bracket into a lower effective rate, saving $4,500 in tax plus Medicare. But the actual saving depends on the type of benefit and any FBT your employer pays.

Medicare levy and low-income thresholds

The Medicare levy is 2% of your taxable income for most full-time workers. However, if your taxable income is below the single-person thresholds of $28,011 and $35,013, you may pay a reduced rate or none at all. Salary packaging could push your taxable income below these thresholds, but only if your income is already low. For most full-time employees on the national minimum wage ($26.44 per hour, $1,004.90 per week, or $52,255 per year), the full 2% applies. The Medicare levy is calculated on your reduced taxable income after salary sacrifice, so you save 2c for every dollar sacrificed. Tax and Medicare details are available on our site.

Super and salary sacrifice

Salary sacrificing into super is one of the most common and tax-effective packaging options. Your super fund taxes these contributions at 15%, which is usually lower than your marginal rate. The concessional contributions cap for 2026–27 is $32,500, including your employer's super guarantee. Your employer must still pay the super guarantee (12% from 1 July 2026) on your original salary, not the reduced salary. This means salary sacrifice into super does not reduce your employer's super obligations. Super contributions through salary sacrifice are not fringe benefits, so no FBT applies.

Example: How packaging changes net disposable income

The ATO provides a clear example for an employee named Sam earning $65,000. Without packaging, Sam has a net disposable income of $41,912 after tax, Medicare, and car expenses. With a car benefit salary sacrificed (no employee contribution), net disposable income drops slightly to $41,612. But with an employee contribution of $7,000 to reduce FBT, net disposable income rises to $43,593. This shows that packaging can improve your take-home, but the structure matters. Take-home pay calculators can help you model your situation.

What changes from 1 April 2027

From 1 April 2027, work-related items provided through a salary sacrifice arrangement will no longer be exempt from FBT. This means items like laptops, phones, and tools will be subject to FBT, which may reduce the tax benefit. The ATO advises that this change applies to benefits provided on or after that date. If you are considering packaging such items, factor in the potential FBT cost.

Is salary packaging right for you?

Salary packaging is generally more beneficial for people on middle to higher incomes because their marginal tax rate is higher. However, you need to consider the impact on government benefits, child support, and the Medicare levy surcharge. The arrangement must be made before you earn the income, and you cannot access the sacrificed salary. The Moneysmart website notes that you may want professional tax advice to work out if salary packaging is right for you. Guides on our site provide further details on packaging and other tax-effective strategies.

In summary, salary packaging changes your fortnightly pay by reducing your taxable income, which lowers your income tax and Medicare levy. The net effect depends on your tax bracket, the type of benefit, and any FBT or employee contributions. Super salary sacrifice is a straightforward way to boost your retirement savings while saving tax. Always check the latest rules and seek advice if your situation is complex.