What Is Salary Packaging?
Salary packaging, also known as salary sacrifice, is a common arrangement in Australia where an employee agrees to give up part of their pre-tax salary in return for certain benefits. These benefits can include a car (through a novated lease), additional superannuation contributions, electronic devices, or even school fees. The key idea is that the benefit is provided instead of cash salary, and the value of the benefit is often not subject to income tax, or is taxed at a lower rate through the fringe benefits tax (FBT) system.
The Australian Taxation Office (ATO) sets the rules for salary packaging. Not all employees can package all benefits – for example, public sector and not-for-profit employers often have caps on tax-exempt benefits. The ATO also requires that the arrangement be made before the salary is earned, and that it is a genuine reduction in cash pay.
How Salary Packaging Relates to the National Full-Time Average
On this site, the central figure is the national full-time adult ordinary-time average, which the ABS publishes in its Average Weekly Earnings series. As of May 2026, that average is $2,083.70 per week, or about $108,352 per year (multiplied by 52). This is the line against which your salary is measured. When you enter your yearly salary before tax, the tool shows you how far above or below that line you sit, expressed as a weekly and hourly amount based on a 38-hour week.
Importantly, the salary you enter is your gross cash salary before any salary packaging arrangements. If you have a salary packaging plan, your employer may deduct the packaged amount from your gross pay, but the figure you compare on this site is still the original gross salary. For example, if your base salary is $120,000 and you package a car worth $15,000, your taxable salary becomes $105,000. However, the line comparison uses the $120,000 figure because that is your full-time ordinary-time earnings before sacrifice.
The Effect on Take-Home Pay
Salary packaging can increase your take-home pay because it reduces your taxable 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. There is also a 2% Medicare levy. By lowering your taxable income, you may move into a lower bracket or reduce the amount taxed at higher rates.
However, the benefit itself may attract fringe benefits tax, which your employer may pass on to you. The net benefit depends on the type of benefit and your employer’s FBT status. For example, salary sacrificing into superannuation is generally very tax-effective because contributions are taxed at only 15% (up to caps), which is often lower than your marginal rate.
Where Your Pay Sits: Averages, Medians, and the Minimum
To give context, the site also provides other benchmarks. The full-time median salary, from the ABS Employee Earnings survey of August 2025, is about $90,532 per year. The all-employees median (including part-time and casual) is about $74,100. These are useful for understanding where your pay sits relative to typical workers, not just the average.
The national minimum wage, set by Fair Work from 1 July 2026, is $26.44 per hour, which works out to $1,004.90 per week and about $52,255 per year on a 38-hour week. Award minimums rose by 4.75% at the same time.
State full-time averages also vary. For instance, the Australian Capital Territory has the highest at about $119,090, while Tasmania is lowest at about $96,008. Western Australia is $115,825, New South Wales $109,658, Victoria $106,137, Queensland $106,064, South Australia $102,450, and the Northern Territory $103,173. These figures come from the same ABS Average Weekly Earnings release.
Using the Tool with Salary Packaging
When you place a salary on the line, you enter your gross yearly salary before tax. The tool then shows your weekly and hourly equivalent on a 38-hour week, and the distance from the national full-time average. If you have salary packaging, your gross salary is still the starting point. The tool does not account for packaging because it is a comparison of base pay, not net pay.
For a deeper understanding of how the figures are derived, see How the figures are set. There you can find the methodology behind the ABS surveys and Fair Work decisions.
Common Misunderstandings
Some people think salary packaging changes the salary that appears on payslips or on this site. It does not. The gross salary remains the same; the packaging is a deduction from that gross amount. The line comparison is always against your full-time ordinary-time earnings before any deductions, including salary sacrifice.
Another point: salary packaging is not the same as a salary reduction. It is a choice to receive part of your pay as a benefit. The ATO requires that the benefit be provided under a formal arrangement. You cannot simply ask for a lower salary and call it packaging.
Guides and Further Reading
For more on how different industries and occupations compare, see Job medians and Industry medians. The Guides section also has articles on salary negotiation, tax planning, and understanding your pay slip.
Summary
Salary packaging meaning is straightforward: it is a way to swap cash salary for tax-effective benefits. The national full-time average line on this site uses your gross salary before any packaging. Understanding both your gross pay and the potential net benefit of packaging can help you make informed decisions about your employment package.
Key Takeaways
- Salary packaging reduces taxable income but does not change the gross salary used for the line comparison.
- The national full-time average is $108,352 per year (May 2026).
- The full-time median is about $90,532; the all-employees median is about $74,100.
- The minimum wage is $52,255 per year (from 1 July 2026).
- State averages range from $96,008 (Tasmania) to $119,090 (ACT).
- Always check with your employer and the ATO before entering a salary packaging arrangement.