Understanding salary packaging and HECS
Salary packaging, also known as salary sacrifice, is an arrangement where you forgo part of your pre-tax salary in exchange for benefits such as a car, superannuation contributions, or electronic devices. This reduces your taxable income, which can affect your HECS-HELP repayment obligations. HECS-HELP is a loan scheme for higher education, and repayments are calculated based on your repayment income – generally your taxable income plus certain fringe benefits and reportable super contributions.
How HECS repayments work
The ATO sets annual repayment thresholds and rates. If your repayment income exceeds the threshold, you must repay a percentage of your income. The percentage increases with income. Because salary packaging lowers your taxable income, it can reduce the amount you repay each year. However, the ATO includes some fringe benefits in repayment income, so the reduction may not be as large as the drop in taxable income.
Where typical packaged salaries sit against the national average
Employees who commonly use salary packaging include those in healthcare, not-for-profit organisations, and public sector roles. These positions often pay above the national full-time average. According to the ABS Average Weekly Earnings for May 2026, the national full-time adult ordinary-time average is $2,083.70 per week, or about $108,352 per year. The full-time median is about $90,532, and the all-employees median is about $74,100.
Many packaged salaries fall between the median and the average, or above the average. For example, a nurse or teacher on a salary of $95,000 may package a car or additional super. Their gross salary is above the median but below the average. A senior executive on $150,000 may package a car and other benefits, placing them well above the average. The key point is that salary packaging does not change your gross salary – it redirects part of it. Your employer still reports your gross salary to the ATO, but your taxable income is lower.
State variations
Full-time averages vary by state. The Australian Capital Territory has the highest average at about $119,090, while Tasmania has the lowest at about $96,008. If you work in the ACT, your salary is more likely to exceed the national average. States and territories provides a breakdown of averages across Australia.
Impact on take-home pay and HECS
Salary packaging can increase your take-home pay because you pay less tax on the packaged amount. However, it also reduces your reportable income for HECS purposes, which may lower your mandatory repayment. For example, if your gross salary is $110,000 and you package $15,000 in benefits, your taxable income becomes $95,000. Your HECS repayment would be based on a lower repayment income (depending on fringe benefit reporting). This can save you hundreds of dollars in repayments each year.
But there are trade-offs. Salary packaging may reduce your superannuation guarantee (if based on reduced ordinary time earnings) and affect your ability to borrow for a home loan, as lenders often look at gross income. The tax brackets for 2026–27 are: 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 Medicare levy of 2%. Packaging is most beneficial if you are in the 30% or higher bracket.
Minimum wage context
The national minimum wage from 1 July 2026 is $26.44 per hour, $1,004.90 per week, or about $52,255 per year on a 38-hour week. This is well below the HECS repayment threshold, so minimum wage earners typically do not make HECS repayments. Award minimums rose 4.75% from that date.
Where to see your salary on the line
If you want to compare your salary to the national full-time average, use the Place a salary on the line tool. It shows your yearly salary before tax, converted to a weekly and hourly figure based on a 38-hour week, and how far you are from the $108,352 average. The tool uses the ABS Average Weekly Earnings as its benchmark.
For more detailed guides on salary packaging and HECS, visit the Guides section. There you will find explanations of how packaging affects your tax, super, and loan repayments.
Key takeaways
- Salary packaging reduces taxable income, which can lower HECS repayments.
- The national full-time average is $108,352; many packaged salaries are at or above this level.
- HECS repayment thresholds are set by the ATO each year; check the latest figures.
- Consider the trade-offs: lower HECS repayments vs. potential impacts on super and borrowing power.
- Use the tools on this site to see where your salary stands.