Salary packaging (also called salary sacrifice) is one of the most effective legal tax minimisation strategies available to Australian employees in 2026. By redirecting part of your pre-tax salary into benefits — including superannuation, cars, laptops, and work-related costs — you reduce your taxable income and potentially your overall tax liability. However, the rules differ significantly between employees of FBT-exempt organisations (hospitals, charities) and commercial employers. Here is what you need to know.

How Salary Packaging Works

Salary packaging redirects part of your gross (pre-tax) salary into benefits before income tax is calculated. Your taxable income is reduced by the packaged amount, reducing PAYG withholding and your end-of-year tax liability. Benefits packaged may include super, a novated car lease, portable electronic devices, professional memberships, and (for eligible employers) living expenses.

FBT-Exempt Employers: Hospitals, Charities, and NFPs

Employees of public hospitals, registered charities, and certain not-for-profit organisations can package up to $9,010 in living expenses (meals, mortgage/rent payments, school fees) per FBT year with no Fringe Benefits Tax payable. An additional $2,650 in meals and entertainment can be packaged via a meal entertainment card. These exemptions are unique to FBT-exempt employers and provide substantial tax benefits unavailable to commercial sector employees.

Example: An FBT-exempt employee earning $85,000 who packages $9,010 in living expenses reduces their taxable income to approximately $75,990 — saving ~$1,900 in income tax while the FBT is exempt for the employer.

Novated Car Leases

A novated lease allows employees of any employer (not just NFPs) to salary package a car. The employer makes lease payments from the employee's pre-tax salary, and the employee uses after-tax "employee contributions" to reduce the FBT liability. For electric vehicles, FBT is fully exempt under the Electric Car Discount scheme, making EV novated leases exceptionally tax-effective in 2026. For petrol vehicles, the FBT calculation reduces but does not eliminate the cost.

Super and Other Salary Sacrifice Benefits

  • Super: All employees can salary sacrifice into super, taxed at 15% instead of their marginal rate. Most tax-effective benefit for most employees.
  • Portable electronic devices: Work-related laptops, phones, and tablets can be salary packaged — FBT-exempt if primarily used for work
  • Professional memberships and subscriptions: FBT-exempt if work-related
  • Briefcases and tools of trade: FBT-exempt

Frequently Asked Questions

Does salary packaging affect my tax return?

Yes. Reportable fringe benefits amounts (RFBAs) from salary packaging appear on your payment summary / income statement and are used to calculate income-tested obligations including Medicare levy surcharge, HECS repayments, private health rebate eligibility, and Centrelink income tests — even though they are not directly subject to income tax. Super salary sacrifice is reported separately as reportable employer super contributions (RESC) and is included in your adjusted income for some tests.

Can I salary package at any employer?

Salary packaging is available at any employer that offers it — but the benefits and FBT treatment vary significantly. FBT-exempt employers (public hospitals, registered charities) offer the most generous packaging benefits including living expenses. Commercial sector employers can offer super, novated car leases, and portable electronic devices but not FBT-exempt living expense packaging. Check whether your employer has a salary packaging provider.

Want to maximise your salary packaging strategy for 2026? Contact AWTS — we help employees and NFP workers structure packaging arrangements to legally minimise their tax.