How to Use the Salary Packaging Calculator

Enter your annual salary and the amount you intend to salary package. Then enter your estimated marginal tax rate and any salary-packaging administration fee.

The calculator estimates:

• Your taxable cash salary after packaging;
• Estimated tax saving on the packaged amount;
• Estimated monthly tax saving;
• Net benefit after packaging administration fees;
• Effective after-tax cost of the packaged benefit;
• Cash position with and without packaging; and
• An optional employer super comparison.

What Is Salary Packaging?

Salary packaging, sometimes called salary sacrificing, is an arrangement where an employee agrees with an employer to receive part of their remuneration in a form other than ordinary cash salary.

Depending on the arrangement, part of an employee’s remuneration may be directed toward an eligible benefit or expense before ordinary income tax is applied to that portion of salary.

Examples can include certain employer-provided benefits, superannuation salary sacrifice or other permitted packaged expenses.

How Can Salary Packaging Save Tax?

A simplified salary-packaging arrangement can reduce the amount of cash salary on which ordinary income tax is calculated.

For example, if you earn $100,000 and package $10,000 of an eligible benefit:

If your estimated combined marginal tax and Medicare rate is 32%, the simplified tax saving on the packaged amount would be:

If a $300 annual administration fee applies:

What Is the Effective Cost of a Salary-Packaged Benefit?

The effective after-tax cost is the value of the benefit less the estimated tax saving, plus any packaging administration fee.

For example:

Salary Packaging vs Salary Sacrifice to Super

Salary sacrifice to super is one form of salary-sacrifice arrangement, but it should not be confused with packaging other employee benefits.

Salary sacrifice to super

Part of future salary is contributed to superannuation rather than paid as cash salary.

Salary packaging benefits

Depending on the employer and arrangement, remuneration may instead be directed toward eligible benefits or expenses.

The tax treatment of super contributions and other packaged benefits is different, so separate calculators should be used for detailed modelling.

For super contributions, use the Superannuation Contribution Calculator.

Does Salary Packaging Reduce Taxable Income?

In some qualifying arrangements, a pre-tax packaged amount reduces the cash salary subject to ordinary income tax.

However, the overall tax outcome is not always as simple as subtracting the packaged amount from salary because other tax rules can apply.

Depending on the arrangement, relevant factors may include:

• Fringe Benefits Tax;
• Reportable fringe benefits;
• Employer exemptions or concessions;
• Employee contribution methods;
• Packaging administration fees;
• GST treatment;
• Superannuation treatment; and
• Government income tests.

What Is Fringe Benefits Tax?

Fringe Benefits Tax, commonly called FBT, is a tax generally associated with certain non-cash benefits provided by employers to employees or their associates.

The employer is generally responsible for FBT obligations, but the economic cost can affect how a salary-packaging arrangement is structured.

Some employers and benefit types may receive exemptions, concessions or different treatment.

This calculator does not automatically calculate FBT because the calculation depends heavily on the specific packaged benefit and employer.

What Are Reportable Fringe Benefits?

Some fringe benefits can result in a reportable fringe benefits amount appearing on an employee’s income statement.

A reportable fringe benefits amount is not necessarily added directly to taxable income in the same way as salary, but it can affect some income tests and government calculations.

These may include certain assessments relating to:

• Government benefits;
• HELP or study-loan repayment calculations;
• Medicare-related income tests;
• Child support;
• Family assistance; or
• Other adjusted-taxable-income measures.

This calculator does not calculate reportable fringe benefit impacts.

Salary Packaging for Hospital and Not-for-Profit Employees

Some employees working for eligible hospitals, charities, public benevolent institutions and other not-for-profit organisations may have access to salary-packaging arrangements with different FBT treatment from ordinary private-sector employers.

The available benefit categories, caps and eligibility conditions can vary significantly between employers.

Because of this, this calculator intentionally lets you enter the packaged amount directly instead of assuming one universal tax-free salary-packaging limit.

Can I Salary Package a Car?

Some employees use salary packaging for vehicle arrangements, including novated leases.

Vehicle salary packaging can involve:

• Lease payments;
• Running costs;
• Fringe Benefits Tax;
• Employee contributions;
• GST treatment;
• Residual values;
• Finance charges; and
• Electric vehicle concessions where applicable.

A general salary-packaging calculator does not fully model all of these vehicle-specific variables.

Does Salary Packaging Affect Superannuation?

The answer depends on the employment agreement and how the employer defines the earnings base used for superannuation.

Some arrangements preserve employer super based on the employee’s original salary before packaging, while other remuneration structures may produce a different result.

This calculator therefore provides two options:

• Super remains based on original salary; or
• Super is estimated using the reduced cash salary.

Check your employment contract or payroll policy for the actual treatment.

Salary Packaging and Take-Home Pay

Salary packaging can reduce the amount of cash salary paid directly to you because part of your remuneration is redirected toward the packaged benefit.

However, the reduction in cash salary may be partly offset by the income-tax saving generated by the pre-tax arrangement.

This means the relevant comparison is not simply:

Salary before packaging vs salary after packaging.

A better simplified comparison is:

Does Salary Packaging Always Save Money?

No.

Potential savings can depend on:

• Your marginal tax rate;
• The type of benefit being packaged;
• Employer eligibility;
• FBT treatment;
• Administration fees;
• GST treatment;
• Government income tests;
• Superannuation consequences; and
• Your personal financial circumstances.

A package with high fees or unfavourable FBT treatment could provide less benefit than a simple tax-rate estimate suggests.

What Marginal Tax Rate Should I Enter?

Use the income-tax rate that approximately applies to the portion of income being packaged.

If you want an estimate based on current Australian resident tax brackets, first use the PAYG Income Tax Calculator Australia.

The Medicare levy can be included separately using the checkbox in this calculator.

Salary Packaging Calculator Assumptions

This calculator assumes:

• The entered packaged amount is eligible to be deducted from pre-tax cash salary;
• The entered marginal tax rate applies to the packaged amount;
• The optional Medicare rate is 2%;
• No Medicare levy reduction or surcharge is calculated;
• No Fringe Benefits Tax is automatically calculated;
• No reportable fringe benefit impact is calculated;
• No HELP or study-loan impact is calculated;
• No government benefit means testing is calculated;
• The administration fee is paid from the user’s economic benefit;
• GST effects are not separately calculated;
• Employer super is calculated using the option selected by the user; and
• Results are indicative rather than an employer payroll calculation.

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