Understanding Salary Packaging Benefits
Salary packaging is an arrangement where an employee chooses to receive part of their total remuneration as non-cash benefits instead of cash salary. These benefits are paid from pre-tax income, reducing the employee's taxable income and potentially increasing their net take-home pay. Common in the not-for-profit, healthcare, and education sectors, salary packaging can include items such as cars, laptops, and even school fees, subject to Fringe Benefits Tax (FBT) rules and caps set by the ATO.
It is important to note that salary packaging does not change your gross salary—the figure that appears on your contract and is used for comparisons like the national full-time average. Instead, it alters the way your pay is structured, affecting only the tax you pay and your net income.
How Salary Packaging Affects Your Pay
When you salary package a benefit, the cost is deducted from your gross pay before tax is calculated. This lowers your taxable income, which can reduce the amount of tax you owe under the 2026–27 resident tax rates: nil up to $18,200, 15% from $18,201 to $45,000, 30% from $45,001 to $135,000, 37% from $135,001 to $190,000, and 45% above $190,000, plus the 2% Medicare levy. For example, if your gross salary is the national full-time average of $108,352 per year, packaging a $15,000 car lease could reduce your taxable income to $93,352, potentially lowering your tax bracket and increasing your weekly take-home pay.
To see the same pay as a year, a week, and an hour, consider the national full-time average: $108,352 per year, $2,083.70 per week (based on a 38-hour week), and approximately $54.83 per hour. Salary packaging does not change these gross figures, but your net weekly pay could be higher than someone on the same gross salary without packaging. Use the Place a salary on the line tool to compare your gross salary to the average.
Salary Packaging and the National Average
The ABS Average Weekly Earnings for May 2026 is $2,083.70 per week for full-time adult ordinary-time earnings, or about $108,352 per year. This figure is gross and does not account for salary packaging. If you have salary packaging, your gross salary might be below the average, but your net pay could be comparable or even higher due to tax savings. For instance, a worker in New South Wales earning the state full-time average of $109,658 per year might package a benefit and effectively take home more than a colleague in Tasmania earning $96,008 without packaging.
State averages vary widely: New South Wales $109,658, Victoria $106,137, Queensland $106,064, South Australia $102,450, Western Australia $115,825, Tasmania $96,008, Northern Territory $103,173, and the Australian Capital Territory $119,090. These are gross averages, so salary packaging can further differentiate net outcomes. See our States and territories page for more detail.
Tax Considerations
Salary packaging can shift your taxable income into a lower bracket, reducing the marginal tax rate applied to your top dollars. However, FBT may apply to certain benefits, and there are caps on tax-exempt amounts, especially for not-for-profit employees. The ATO provides guidelines on what can be packaged and the associated tax treatment. Always consult a tax professional or your employer's salary packaging provider to understand your specific situation.
The Bottom Line
Salary packaging benefits do not change your gross salary, but they can improve your net pay by reducing your taxable income. When comparing your salary to the national full-time average, remember that the average is based on gross earnings before any packaging. To see where your gross salary stands, use the Place a salary on the line tool. For more information on how salaries are measured, visit How the figures are set.