Understanding my salary packaging: gross salary, package, and take-home pay

What is salary packaging?

Salary packaging, also called salary sacrifice, 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 explains that this lowers your taxable income, so you pay less income tax and Medicare levy. There is no restriction on the types of benefits you can include, but your employer may charge fringe benefits tax (FBT) on some items.

How salary packaging affects your take-home pay

Your take-home pay is the amount that reaches your bank account after income tax and the Medicare levy. When you salary package, your taxable income drops, so less tax is withheld. However, you receive a benefit instead of cash. The ATO provides a clear example using a $65,000 annual remuneration:

• Salary only: Taxable income $65,000, income tax $10,288, Medicare $1,300, net disposable income $41,912 (after car expenses).
• Salary plus car (no employee contribution): Taxable income $47,647, tax $5,082, Medicare $953, net disposable income $41,612.
• Salary plus car (with employee contribution): Taxable income $60,855, tax $9,045, Medicare $1,217, net disposable income $43,593.

Notice that the third scenario gives the highest net disposable income because the employee contribution reduces the fringe benefit. Your actual take-home depends on the benefit type, FBT, and any contributions you make.

Common mix-ups: gross salary vs package vs take-home

Many job ads list a "package" that includes superannuation and sometimes other benefits. Your gross salary is the cash component before tax. Take-home is after tax and Medicare. Salary sacrifice sits between: you trade gross salary for a benefit, which reduces your taxable income but also reduces the cash you receive. For example, a $100,000 package might include $11,500 super (12% from 1 July 2026) and $88,500 salary. If you salary sacrifice a car worth $10,000, your taxable salary drops to $78,500, but you get the car. Your take-home cash is lower, but you have the benefit.

Key considerations

• Super guarantee: Your employer must still pay super on your original salary, not the sacrificed amount. Salary sacrificed super contributions are additional and count toward the concessional cap.
• Medicare levy surcharge: If your income is above the threshold and you lack appropriate private hospital cover, you may pay an extra 1% to 1.5%. Salary sacrifice can reduce your income below the surcharge threshold.
• Government benefits: Lower taxable income may affect family tax benefit, child support, and study loan repayments.
• Work-related items: From 1 April 2027, items like laptops or phones provided through salary sacrifice will no longer be exempt from FBT.

For more details, see our Salary packaging guide and Take-home pay calculator.