What Is Salary Packaging?
If you’ve ever looked at your payslip and wondered whether there’s a smarter way to structure your income, you’ve probably asked:
What is salary packaging?
Salary packaging (also known as salary sacrifice) is a legal arrangement where you agree to receive part of your income in the form of benefits rather than cash salary. The goal? To reduce your taxable income and potentially increase your take-home pay.
In Australia, salary packaging is commonly used in:
- Healthcare
- Not-for-profit organisations
- Government roles
- Education
- Large corporate employers
But here’s the thing — it’s not automatically beneficial for everyone. The real value depends on your tax bracket, employment type, and long-term financial strategy.
That’s where structured advice from 360 Financial Strategists becomes important — because packaging income without considering superannuation, borrowing capacity or retirement planning can backfire.
But ….What Is Salary Packaging?
Let’s answer it clearly.
Salary packaging is when you “sacrifice” part of your pre-tax salary in exchange for employer-provided benefits.
Instead of being paid fully in cash and taxed on 100% of your income, you:
- Agree to reduce your taxable salary.
- Receive certain benefits funded from your pre-tax income.
This can reduce your taxable income and therefore reduce income tax payable.
The Australian Taxation Office (ATO) explains it clearly here:
https://www.ato.gov.au/individuals-and-families/jobs-and-employment-types/working-as-an-employee/salary-sacrificing-for-employees
What Can You Use Salary Packaging For?
Superannuation Contributions
One of the most common and effective uses.
You can salary sacrifice into superannuation, which:
- Is taxed at 15% inside super (instead of your marginal tax rate)
- Helps grow retirement savings
- Can reduce taxable income
This is particularly powerful for higher income earners.
At 360 Financial Strategists, super contribution strategy is often integrated into:
- Retirement modelling
- Wealth creation planning
- Cashflow structuring
Novated Leases (Cars)
Salary packaging a car via a novated lease allows:
- Lease payments
- Fuel
- Insurance
- Registration
- Servicing
To be paid from pre-tax income.
However, it’s not always cheaper. The Fringe Benefits Tax (FBT) rules matter, and it’s worth reading up about them before you start discussing salary packaging with your employer.
Rent or Mortgage Payments (Not-for-Profits)
If you work for certain not-for-profit or public benevolent institutions (PBIs), you may be able to package:
- Rent
- Mortgage repayments
- Living expenses
Up to a capped threshold.
This is one of the most financially powerful salary packaging arrangements available in Australia.
Laptop and Portable Electronic Devices
In some industries, work-related devices can be salary packaged.
Additional Super (Concessional Contributions)
For those approaching retirement, structured salary sacrifice can significantly boost super in the final 10–15 years of work. This is often part of a broader retirement transition strategy designed by 360 Financial Strategists.
Best Use Cases for Salary Packaging
Let’s talk practically.
High Income Earners
If you’re in the 37% or 45% tax bracket, sacrificing into super at 15% tax can be powerful.
Healthcare & Not-for-Profit Employees
This group often gains the most due to generous FBT exemptions.
Pre-Retirees
Strategic salary sacrifice can:
- Reduce tax
- Boost retirement savings
- Optimise transition-to-retirement strategies
Employees Wanting a Novated Lease
Can work well if:
- You drive regularly
- You’re comfortable with long-term lease structure
- It aligns with your broader financial plan
At 360 Financial Strategists, we always assess whether salary packaging improves:
- Net cashflow
- Borrowing power
- Long-term wealth trajectory
- Super contribution caps
Because tax savings alone don’t equal smart strategy.
When Salary Packaging Might NOT Be Ideal
It’s not always beneficial.
Salary packaging can:
- Reduce borrowing capacity (lenders assess net income)
- Impact Centrelink entitlements
- Push you over super contribution caps
- Increase complexity with Fringe Benefits Tax
Before implementing salary packaging, we recommend reviewing it as part of your:
- Financial Planning strategy
- Wealth Creation plan
- Debt & Cashflow structure
All services offer can help you with at 360 Financial Strategists.
Does Salary Packaging Affect Borrowing Capacity?
Yes — potentially.
Banks often assess your taxable income after salary sacrifice.
If you’re planning to buy property, speak to a Mortgage Broker first.
This is where integrated advice from 360 Financial Strategists makes a difference. Salary packaging decisions should align with your property goals, not work against them.
Is Salary Packaging Worth It?
It depends on:
- Your tax bracket
- Employer eligibility
- FBT rules
- Super caps
- Long-term goals
There’s no universal answer.
That’s why tailored modelling is essential.
How 360 Financial Strategists Can Help
Salary packaging should never be viewed in isolation.
At 360 Financial Strategists, we integrate salary packaging into:
Our approach ensures:
- You don’t exceed super caps
- You don’t accidentally reduce borrowing power
- You optimise tax efficiency
- Your cashflow stays healthy
Because smart financial decisions should work together — not against each other.
Salary packaging can be incredibly powerful — but only when aligned with your:
- Tax position
- Property plans
- Retirement goals
- Super contribution strategy
Before restructuring your income, speak with 360 Financial Strategists to ensure your salary packaging decision enhances — rather than complicates — your broader financial strategy.
Secure your financial future with 360 Financial Strategists—contact us today for personalised wealth creation and financial planning solutions.
Frequently Asked Questions (FAQs)
What can you use salary packaging for?
Common uses include:
- Superannuation contributions
- Novated leases
- Rent or mortgage (for eligible NFP employees)
- Work-related devices
Is salary packaging the same as salary sacrifice?
Yes — in most cases, the terms are used interchangeably in Australia.
Does salary packaging reduce your taxable income?
Yes, if structured correctly. However, some benefits attract Fringe Benefits Tax.
Does salary packaging affect Centrelink?
It can. Certain reportable fringe benefits are included in income tests.
Can you salary package a mortgage?
Only if you work for eligible not-for-profit organisations that allow living expense packaging.
Does salary packaging affect super?
Yes. Salary sacrificing into super increases concessional contributions and counts toward annual caps.
