What is salary packaging?
Salary packaging (also called salary sacrificing) is an arrangement where you give up part of your pre-tax salary in exchange for benefits your employer provides. The benefits can include a car, laptop, superannuation contributions, or even mortgage payments. Because the packaged amount is taken from your salary before tax, your taxable income drops, and you pay less income tax and Medicare levy. The result is a higher take-home pay than if you received the same gross salary without packaging.
In Australia, salary packaging is common in the public sector, including health. For NSW Health employees, it is a popular way to stretch your salary further. The key is that the benefit itself may be subject to Fringe Benefits Tax (FBT), but many items are exempt or have concessions.
How salary packaging works in NSW Health
NSW Health offers salary packaging through approved providers. Typical benefits include:
- Car leasing (novated lease)
- Mortgage or rent payments (up to a limit)
- Meal entertainment and venue hire (capped at $2,650 per year FBT-exempt)
- Superannuation (additional contributions beyond the compulsory Super Guarantee)
- Work-related items like laptops or tools
Each benefit has its own FBT treatment. For example, a car used partly for work may have a lower taxable value. Your employer’s packaging provider will calculate the exact tax savings.
The process is simple: you choose the benefit, your employer deducts the packaged amount from your pre-tax salary, and the benefit is provided. Your taxable income reduces by that amount, so your PAYG withholding is lower. At tax time, your employer reports the fringe benefits on your payment summary, but you do not need to declare them as income.
Take-home pay with salary packaging: an example
Let’s use the on-site figures. The national full-time adult ordinary-time average is about $108,352 a year (ABS Average Weekly Earnings, May 2026). The NSW full-time average is about $109,658. Suppose you are a NSW Health employee earning $109,658 gross.
Without salary packaging, your tax (2026–27 rates) would be:
- Nil on first $18,200
- 15% on next $26,800 ($18,201 to $45,000) = $4,020
- 30% on next $90,000 ($45,001 to $135,000) = $27,000 (but you only earn $109,658, so the 30% bracket applies from $45,001 to $109,658 = $64,658 at 30% = $19,397.40)
- Total tax = $4,020 + $19,397.40 = $23,417.40
- Plus Medicare levy 2% = $2,193.16
- Total deductions = $25,610.56
- Take-home pay = $109,658 - $25,610.56 = $84,047.44
Now, if you salary package $9,000 into a car lease (a common amount), your taxable income becomes $100,658. Tax on that:
- Nil on $18,200
- 15% on $26,800 = $4,020
- 30% on $55,658 ($45,001 to $100,658) = $16,697.40
- Total tax = $20,717.40
- Medicare levy 2% = $2,013.16
- Total deductions = $22,730.56
- Take-home pay = $100,658 - $22,730.56 = $77,927.44 (but you also have the car benefit, which is not cash but reduces your living costs). Actually, the take-home cash is lower because the $9,000 is gone to the car lease. But you have a car. The real benefit is that you would have needed to spend after-tax dollars on a car anyway. By packaging, you save the tax on that $9,000. The tax saving is $25,610.56 - $22,730.56 = $2,880. So your overall position improves by about $2,880.
This example shows how salary packaging can boost your effective take-home pay. The exact saving depends on your marginal tax rate and the type of benefit.
Comparing with the national average
The national full-time average is about $108,352. The NSW average is slightly higher at $109,658. If you are a NSW Health employee earning around that level, salary packaging can help you keep more of your income. The national minimum wage (from 1 July 2026) is $52,255 a year, so packaging is less relevant at that level because tax is low. But for average earners, the tax savings are meaningful.
Remember that salary packaging does not change your gross salary; it changes how much tax you pay. Your employer still reports your gross salary to the ATO, but your taxable income is lower. This is perfectly legal and encouraged by the government for certain benefits.
How the figures are set
The national average we use comes from the ABS Average Weekly Earnings, May 2026. The medians are from ABS Employee Earnings, August 2025. The minimum wage is from Fair Work, 1 July 2026. These are the benchmarks for comparing your pay. Salary packaging does not affect these benchmarks; it affects your personal take-home pay.
For more on how we calculate the line, see How the figures are set. For state-specific data, including NSW, see New South Wales.