How cbb salary packaging works and what it means for your after-tax pay

How cbb salary packaging affects your take-home pay

When you work out how much of your salary actually reaches your bank account, you need to account for income tax and the Medicare levy. Salary packaging – also called salary sacrificing – can reduce your taxable income and increase your net pay. One specific option is cbb salary packaging, available to employees of public benevolent institutions (PBIs) and health promotion charities (HPCs).

Understanding your taxable income

Your employer pays you a gross salary. From that, you can sacrifice a portion for benefits like a car, super, or other expenses. The Australian Taxation Office explains that an effective salary sacrifice arrangement must be agreed before you earn the income, and you cannot access the sacrificed amount. Your taxable income becomes your gross salary minus the sacrificed amount.

For 2026–27, the tax rates for residents 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

You may also be eligible for the Low Income Tax Offset (LITO), which can reduce your tax to zero.

Medicare levy

The Medicare levy is 2% of your taxable income, but there are thresholds. For a single person, the latest published thresholds are $28,011 and $35,013. If your taxable income is below $28,011, you pay no levy. Between $28,011 and $35,013, you pay a shade rate of 10c per dollar over the lower threshold. Above $35,013, you pay the full 2%. Most full-time salaries are above $35,013, so you pay the full levy.

How cbb salary packaging works

If you work for a PBI or HPC, you may be able to use cbb salary packaging. The CBB calculator shows that the maximum amount you can package is $15,899 per year. This amount is deducted from your gross salary before tax, reducing your taxable income. Your employer pays fringe benefits tax (FBT) on most packaged benefits, but for PBIs and HPCs, there are caps and concessions.

For example, if your gross salary is $80,000 and you package $15,899, your taxable income becomes $64,101. You then pay tax and Medicare on that lower amount. Your take-home pay increases because you saved tax on the packaged amount.

However, salary packaging is not always beneficial for everyone. The Moneysmart website notes that it is usually more effective for middle to high incomes because their marginal tax rate is higher. You should also consider that packaging may affect government benefits, child support, and the Medicare levy surcharge.

Example calculation

Let's take the national minimum wage: $26.44 per hour, $1,004.90 per week, or $52,255 per year (38 hours per week, 52 weeks). Without salary packaging, your taxable income is $52,255. Tax on that (using 2026–27 rates) is approximately $4,020 + 30% of ($52,255 - $45,000) = $4,020 + $2,176.50 = $6,196.50. Plus Medicare levy 2% = $1,045.10. Total deductions $7,241.60. Take-home pay about $45,013.40 per year.

If you could package $15,899 (assuming you work for a PBI/HPC), taxable income becomes $36,356. Tax: 15% of ($36,356 - $18,200) = $2,723.40. Medicare: shade rate applies because $36,356 is above $35,013? Actually $36,356 > $35,013, so full 2% = $727.12. Total deductions $3,450.52. Take-home pay $32,905.48 plus the benefit value? Wait, careful: The sacrificed amount is not cash; it's used to pay for benefits. So your net disposable income includes the benefit. The ATO example shows that with employee contributions, net disposable income can be higher. But for simplicity, your after-tax cash salary is lower because you sacrificed salary, but you receive a benefit. So your overall financial position may improve.

Important considerations

• Salary sacrifice into super is not a fringe benefit; it's an employer contribution taxed at 15% in the fund.
• From 1 April 2027, work-related items provided through salary sacrifice will no longer be exempt from FBT.
• You cannot claim a tax deduction for expenses your employer pays as part of your package.
• Salary packaging may affect your super guarantee – your employer must still pay the full 12% on your original salary.

For more details, see our guides on Salary packaging and Tax and Medicare.

Calculating your take-home pay step by step

1. Start with your gross annual salary.
2. Subtract any salary sacrifice amount (e.g., cbb packaging up to $15,899).
3. Apply the tax brackets and offsets to find your income tax.
4. Calculate the Medicare levy based on your taxable income and thresholds.
5. Subtract tax and Medicare from your taxable income to get your after-tax cash salary.
6. Add back the value of any benefits received (if you want net disposable income).

Remember that super contributions are separate – your employer pays 12% super guarantee on your gross salary, and any salary sacrifice super contributions are additional but count toward the concessional cap of $32,500.

The impact of super

Salary sacrificing into super can be tax-effective because contributions are taxed at 15% instead of your marginal rate. However, you cannot access that money until retirement. If you use cbb salary packaging for super, the sacrificed amount goes into your super fund as an employer contribution, reducing your taxable income further.

When cbb salary packaging makes sense

cbb salary packaging is most valuable if you are in a higher tax bracket and can use the full $15,899 cap. For someone earning $108,352 (the average full-time ordinary time earnings), packaging $15,899 saves about $5,770 in tax and Medicare. But you must ensure the benefits you receive are things you would have paid for with after-tax money anyway.

Always check with your employer whether they offer cbb salary packaging and what benefits are available. Use the CBB calculator to estimate your savings.