What is NFP salary packaging? Understanding your take-home pay

What is NFP salary packaging?

If you work for a not-for-profit (NFP) organisation, you may be able to salary package – also called salary sacrifice – part of your pay. This means you agree to receive less before-tax salary in exchange for certain benefits your employer pays for. The result is a lower taxable income, which can reduce the amount of income tax and Medicare levy you pay.

But there's a common mix-up: your gross salary (the figure in your contract) is not the same as your package value, and neither is the amount that lands in your bank account. Understanding the difference helps you compare job offers and plan your budget.

How NFP salary packaging works

Under an effective salary sacrifice arrangement, you must enter the agreement before you perform the work. Your employer then uses part of your pre-tax salary to pay for benefits such as a car, school fees, or super contributions. The Australian Taxation Office explains that there is no restriction on the types of benefits, but your employer may have to pay fringe benefits tax (FBT) on some of them .

For NFP employers, certain benefits can be FBT-exempt up to a capped amount – for example, public benevolent institutions can offer up to $15,900 in exempt benefits per year. This makes salary packaging more attractive in the NFP sector. However, from 1 April 2027, work-related items provided through salary sacrifice will no longer be exempt and will become subject to FBT.

The impact on your take-home pay

Your take-home pay is what remains after income tax and the Medicare levy are deducted. When you salary package, your taxable income drops, so you pay less tax. But you also receive less cash because the benefit cost comes out of your salary.

For example, if your annual remuneration is $65,000 and you sacrifice $17,353 for a car without employee contributions, your taxable income falls to $47,647. Using 2026–27 tax rates, your income tax would be about $5,082 plus $953 Medicare levy, leaving you with $41,612 after tax and the sacrifice amount – but you have no car expenses to pay yourself. Compare that to not packaging: taxable income $65,000, tax $10,288, Medicare $1,300, and you pay $11,500 in car expenses from after-tax income, leaving $41,912 net disposable income. In this scenario, packaging with employee contributions actually gives you a higher net disposable income of $43,593 .

Key considerations

• Super guarantee: Your employer must still pay the 12% super guarantee on your original salary, not the reduced amount after sacrifice.
• Government benefits: A lower taxable income may affect family tax benefit, child support, or the Medicare levy surcharge.
• Reportable fringe benefits: Some packaged benefits appear on your income statement and can affect your eligibility for certain offsets or obligations.
• Professional advice: Salary packaging is usually more beneficial for middle to higher incomes because of the marginal tax rate. Moneysmart recommends getting professional tax advice to see if it's right for you .

How to compare job offers

When you see a job ad that says "$80,000 plus super and salary packaging", the $80,000 is your gross cash salary before tax. The super is extra (12% from 1 July 2026). The salary packaging benefit is an option to reduce your taxable income further. Your actual take-home pay depends on how much you choose to sacrifice and the type of benefits.

Use our Take-home pay calculator to estimate your net income with and without packaging. You can also check the Salary packaging guide for more details on FBT and caps.