Average line

HomeGuidesSalary packaging

Salary packaging living expenses and your take-home pay against the national average

Salary packaging living expenses can lower your taxable income, but the effect on take-home pay depends on your salary relative to the national full-time average of $108,352 a year.

This sits on the Australian full-time average.

Week, hour, and a tax sketch

$2,084 a week · $54.83 an hour if spread over 38 hours

About $83,159 after resident income tax and a 2% Medicare levy.

2026–27 resident rates and a 2% Medicare levy. Not a tax assessment.Open the full line

How salary packaging living expenses affects your take-home pay

Salary packaging living expenses is a way to pay for certain costs with pre-tax dollars, reducing your taxable income and increasing your take-home pay. This article uses the national full-time average as a reference to show how packaging can change what you actually keep.

What is salary packaging living expenses?

Salary packaging (also called salary sacrificing) is an arrangement where you agree to forgo part of your salary in exchange for benefits. When those benefits are living expenses—such as rent, mortgage payments, utilities, or groceries—the amount you sacrifice is deducted from your gross salary before tax is calculated. The result is a lower taxable income, less tax withheld, and more money in your pocket each pay period.

The Australian Tax Office (ATO) sets rules for what can be packaged and how much. For employees of not-for-profit organisations, the cap is typically $15,900 per year for living expenses, plus additional amounts for other benefits. Public sector and private sector employees have different caps and conditions.

The national full-time average as a benchmark

The national full-time adult ordinary-time average is $2,083.70 per week, or about $108,352 per year, according to the ABS Average Weekly Earnings for May 2026. This is the line on this site. If you earn this amount, your gross weekly pay is $2,083.70. After tax and Medicare levy, your take-home pay is roughly $1,500 per week (depending on your tax file number declaration and any other deductions).

Now, suppose you salary package $200 per week in living expenses. Your taxable income drops to $1,883.70 per week. Using the 2026–27 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 2% Medicare levy), the tax saved is about $60 per week. Your take-home pay increases by that amount, minus any administration fee your employer charges.

How does this compare to the median?

The full-time median salary is about $90,532 per year (ABS Employee Earnings, August 2025). For someone on the median, packaging living expenses can also be beneficial, but the tax savings are smaller because they are in the 30% bracket. The all-employees median (including part-time and casual) is about $74,100. For those on lower incomes, salary packaging may still help, but the benefit is reduced and some expenses may not be eligible.

State differences

Full-time average earnings vary by state. For example, the Australian Capital Territory has the highest average at $119,090, while Tasmania has the lowest at $96,008. If you live in a state with a higher average, your tax savings from packaging could be larger because you are in a higher tax bracket. Conversely, in lower-average states, the savings are more modest. See the States and territories page for details.

Minimum wage and packaging

The national minimum wage from 1 July 2026 is $26.44 per hour, or $1,004.90 per week on a 38-hour week (about $52,255 per year). At this level, salary packaging living expenses may not be practical because the tax-free threshold already covers a large portion of income, and packaging could reduce your entitlement to certain government benefits. Fair Work sets the minimum wage, and award minimums rose by 4.75% from that date.

Tax considerations

When you salary package living expenses, the packaged amount is generally exempt from fringe benefits tax (FBT) if you work for a not-for-profit or public hospital. For other employers, FBT may apply, which could reduce the net benefit. The ATO provides guidance on what counts as a living expense. Common examples include:

  • Rent or mortgage payments on your principal place of residence
  • Utility bills (electricity, gas, water)
  • Groceries
  • Car expenses (if used for personal travel)

You cannot package expenses that are already deductible, such as work-related travel. Also, packaging may affect your eligibility for the Family Tax Benefit or other means-tested payments.

How to see your own position

You can use the Place a salary on the line tool to enter your salary and see how it compares to the national average. The tool shows your weekly and hourly pay on a 38-hour week, plus the distance from the full-time average. You can also experiment with adding a salary packaging amount to see the effect on take-home pay.

Summary

Salary packaging living expenses can boost your take-home pay by reducing your taxable income. For someone on the national full-time average of $108,352, the savings are meaningful, especially if you have eligible expenses. However, the benefit depends on your employer, your state, and your overall financial situation. Always consult a tax professional or use the ATO's resources to ensure you comply with the rules.

For more on how the figures are set, see How the figures are set.

Questions

What living expenses can be salary packaged?

Common living expenses that can be salary packaged include mortgage or rent payments, utility bills, groceries, and car expenses. The rules vary by employer and sector. For not-for-profit employees, the ATO allows up to $15,900 per year for a range of living expenses under a salary packaging arrangement. Public sector employees may have different caps. Always check with your employer or a tax professional.

How does salary packaging living expenses affect my take-home pay compared to the average?

Salary packaging reduces your taxable income, so you pay less tax and Medicare levy. For example, if you earn the national full-time average of $108,352 and package $10,000 in living expenses, your taxable income drops to $98,352. Using the 2026–27 tax rates, you would save about $3,000 in tax plus 2% Medicare. Your take-home pay increases by that amount. However, your employer may charge an administration fee, and some packaged amounts may affect your eligibility for certain government benefits.

Is salary packaging living expenses worth it for someone on the national average?

For someone earning the national full-time average of $108,352, salary packaging living expenses can be worthwhile if you have eligible expenses and your employer offers it. The tax savings are real, especially if you are in the 30% or 37% tax bracket. However, you need to consider any fringe benefits tax (FBT) implications. For not-for-profit employees, FBT exemptions often apply. For other sectors, FBT may reduce the benefit. It's best to calculate your specific situation using the [Place a salary on the line](/line) tool.

Related guides