What is salary packaging for employers?
Salary packaging, also known as salary sacrifice, is an arrangement where an employer provides benefits to an employee in exchange for a reduction in pre-tax salary. Common benefits include novated car leases, additional superannuation contributions, laptops, and childcare vouchers. The Australian Taxation Office (ATO) sets the rules, and employers must comply with fringe benefits tax (FBT) requirements. Salary packaging can reduce an employee's taxable income and, in some cases, lower the employer's payroll tax liability.
How salary packaging interacts with the national average line
The national full-time adult ordinary-time average is $108,352 per year (ABS Average Weekly Earnings, May 2026). This figure is based on gross earnings before any salary packaging deductions. Therefore, salary packaging does not change the gross salary that appears on the line. For example, an employee earning exactly the national average could package a car and reduce their taxable income, but their gross salary remains $108,352. The line compares gross salaries, not packaged amounts.
Why state and award differences matter
State full-time averages vary significantly across Australia. The Australian Capital Territory has the highest average at $119,090, while Tasmania has the lowest at $96,008. These differences reflect industry mix, cost of living, and award conditions. Salary packaging can be a tool for employers to attract talent in higher-cost states without raising gross salary. However, state payroll tax thresholds and rates can influence whether employers offer packaging. For instance, some states exempt certain benefits from payroll tax, making packaging more attractive.
Award conditions also play a role. Some awards, particularly in the public sector, health, and education, have specific clauses about salary packaging. For example, the Children's Services Award may allow packaging of superannuation above the minimum, while other awards may restrict packaging to certain items. Employers must ensure that any salary packaging arrangement does not breach the relevant award or the National Employment Standards.
Using the site to see where you stand
You can Place a salary on the line to see how your gross salary compares to the national average. The site also shows States and territories averages, so you can see how your location affects your position. If your employer offers salary packaging, remember that the line compares gross salary, not the packaged amount. So if your gross salary is $100,000 but you package $10,000, your line position is still $100,000.
Conclusion
Salary packaging is a valuable employer tool for reducing tax and attracting staff, but it does not change the gross earnings that define the national average. State and award factors are more direct influences on where a salary sits relative to the line. Understanding these differences helps you interpret your position on the salary index.