What is NFP salary packaging?
Not-for-profit (NFP) salary packaging is a way for employees of eligible organisations to pay for certain expenses with pre-tax dollars. Instead of receiving your full salary in cash, you agree to have part of it directed towards benefits such as rent, mortgage payments, car leases, or school fees. Because that portion is not counted as taxable income, you pay less tax overall, and your take-home pay can be higher than if you had received the same salary without packaging.
This arrangement is available to employees of public benevolent institutions, health promotion charities, public hospitals, and some other NFP entities. It is not available to for-profit businesses or government agencies (except certain public hospitals). The rules are set by the Australian Tax Office (ATO), which also sets annual caps on the amount that can be packaged tax-free.
How it affects your take-home pay
To understand the impact, consider the national full-time average salary of $108,352 (ABS Average Weekly Earnings, May 2026). Without salary packaging, an employee earning this amount would pay tax according to the 2026–27 resident rates: nil on the first $18,200, 15% on the next $26,800, 30% on the next $90,000, and 37% on the remaining $73,352 (up to $135,000). The total tax (before Medicare levy) would be roughly $25,000–$26,000, leaving a take-home of about $82,000–$83,000.
With salary packaging, you could reduce your taxable income by up to the ATO cap (for example, $15,900 for general benefits). That would bring your taxable income to $92,452, which is entirely within the 30% bracket. Your tax would drop to about $20,000, increasing take-home pay by roughly $5,000–$6,000. The exact saving depends on your marginal tax rate and the amount packaged.
Comparing to the average line
The site's line is the national full-time adult ordinary-time average of $108,352. Salary packaging does not change this statistic—it is a measure of gross earnings before any packaging. However, for an individual, packaging can make that gross salary go further in terms of net pay. If you are considering a job offer or negotiating salary, it is useful to know how packaging affects your effective income.
Other considerations
- Medicare levy: The 2% Medicare levy applies to your taxable income after packaging, so you still pay it on the reduced amount.
- State averages: The national average masks differences between states. For example, the ACT full-time average is $119,090, while Tasmania is $96,008. Salary packaging benefits are the same regardless of location, but the tax savings may be larger in higher-income states.
- Minimum wage and awards: The national minimum wage from 1 July 2026 is $26.44 per hour ($52,255 per year on a 38-hour week). Salary packaging is not available to minimum-wage earners in most cases, as it requires a salary above the packaging cap to be worthwhile.
- Medians: The full-time median is $90,532 (ABS Employee earnings, August 2025). For someone earning the median, packaging could also provide significant tax savings, though the benefit is smaller than for the average earner.
How to use this information
If you are employed by an eligible NFP, check with your employer or a salary packaging provider to see what benefits are available and what caps apply. You can also place a salary on the line to see how it compares to the national average, or read about how the figures are set to understand the sources behind the averages.
Salary packaging is a legitimate way to boost your take-home pay, but it requires careful planning. The ATO caps are reviewed annually, and your individual circumstances (such as family status and other deductions) will affect the final outcome. Always consult a tax professional or use the ATO's online resources for personalised advice.