How positive salary packaging boosts your take-home pay
Pay varies by role and packaging arrangement; compare take-home pay after tax and Medicare levy.
Compare job offers using the amount that reaches your bank account
When you receive a job offer, the headline salary is only part of the picture. What really matters is the amount that lands in your bank account after income tax, the Medicare levy, and any salary packaging arrangement. This guide explains how positive salary packaging can increase your take-home pay and help you compare offers fairly.
What is positive salary packaging?
Salary packaging (also called salary sacrificing) is an agreement with your employer to swap part of your pre-tax salary for benefits such as a car, super contributions, or work-related items. The Australian Taxation Office shows that a properly structured arrangement reduces your taxable income, so you pay less tax. For example, if you earn $65,000 and sacrifice $4,145 for a car with an employee contribution of $7,000, your net disposable income can be higher than without packaging (see the ATO’s 2025–26 example).
notes that common packaged benefits include cars, computers, childcare, and super. The key is that you arrange the package before you earn the income – you cannot sacrifice salary after it has been paid.
How positive salary packaging affects tax and Medicare
For the 2026–27 tax year, the tax-free threshold is $18,200. Income between $18,201 and $45,000 is taxed at 15c per dollar, and the next bracket up to $135,000 at 30c per dollar. The Medicare levy is 2% of taxable income, with reduced rates for singles earning between $28,011 and $35,013. By lowering your taxable income through salary packaging, you may drop into a lower tax bracket or reduce the Medicare levy you pay.
However, be aware that most packaged benefits are subject to fringe benefits tax (FBT), which your employer may pass on as a cost. The ATO advises that from 1 April 2027, work-related items provided via salary sacrifice will no longer be exempt from FBT. Always ask your employer whether the benefit is FBT-free or if you need to make an employee contribution to avoid FBT.
Impact on super and other entitlements
Salary-sacrificed super contributions are treated as employer contributions and are not fringe benefits. They count towards the concessional contributions cap ($32,500 for 2026–27) and are taxed at 15% inside your super fund. Your employer must still pay the super guarantee (12% from 1 July 2026) on your original salary, not the reduced amount. This means you can boost your super without losing employer contributions.
A lower taxable income may also affect the Medicare levy surcharge (if you earn above the threshold and lack hospital cover), study loan repayments, child support, and some government benefits. Use a Take-home pay calculator that includes these factors to see the full picture.
Comparing job offers with salary packaging
When comparing two offers, look beyond the base salary. Calculate your estimated take-home pay after tax, Medicare, and any packaging arrangement. For example, an offer of $80,000 with a novated lease car may leave you with more cash in hand than an $85,000 salary without packaging, depending on the benefit value and FBT.
Key steps:
- Ask the employer what benefits are available and whether they attract FBT.
- Check if you can make employee contributions to reduce FBT.
- Use the Salary packaging guide to model your net disposable income.
- Remember that super guarantee is calculated on your original salary, so your super balance may grow faster with a higher base salary.
Final thoughts
Positive salary packaging can be a powerful tool to increase your after-tax income, but it requires careful planning. The Australian Taxation Office and Moneysmart both emphasise that you must enter the arrangement before you earn the income and that you cannot claim a tax deduction for expenses your employer pays. Always compare the net disposable income – the amount that actually reaches your bank account – rather than the gross salary.
For more details, see our Tax and Medicare page and the Super guide. If you are unsure about a specific offer, consult a tax professional.
Questions
What is positive salary packaging?
Positive 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 like a car, super contributions, or electronic devices. Because the sacrificed amount is not included in your taxable income, you pay less income tax and Medicare levy, potentially increasing your net disposable income. The Australian Taxation Office explains that an effective salary sacrifice arrangement must be entered before you perform the work and you cannot access the sacrificed salary.
How does salary packaging affect my take-home pay and super?
Salary packaging reduces your taxable income, so less tax and Medicare levy are withheld from your pay. However, your employer must still pay the super guarantee (12% from 1 July 2026) on your original salary, not the reduced amount. Salary-sacrificed super contributions count toward the concessional cap ($32,500 for 2026–27) and are taxed at 15% inside super. Always check that the packaged benefit is worth more than the tax saved, especially if fringe benefits tax applies.
Can salary packaging affect my government benefits or Medicare surcharge?
Yes. A lower taxable income may reduce your Medicare levy surcharge liability (if you earn above the threshold and lack hospital cover) and can affect child support, study loan repayments, and some tax offsets. The Medicare levy itself is 2% of taxable income, with reduced rates for incomes between $28,011 and $35,013 for singles. Use a take-home pay calculator that includes these factors before accepting a packaged offer.