7 savvy salary packaging tips

We have many clients who work for not-for-profits (NFPs) or are doctors and nurses. These professionals tend to have access to robust salary packaging and over the years of helping them maximise their benefits, we’ve picked up a thing or two worth sharing. Two months into the FBT year, we figured it was a good time to share some of those tips.

Before we do that, however, here’s a quick salary packaging refresher.

What is salary packaging?

We all have personal expenses – things like buying groceries, paying for childcare, vehicle costs, mortgages and/or rent payments.

If you are paid a salary, usually your employer takes your income tax out of your salary, sends that to the government on your behalf, and pays the balance to your bank account. You would then use what’s in your bank account to pay for your personal expenses.

Salary packaging (also sometimes called salary sacrificing) is something you set up with your employer (if eligible) that allows you to pay for some of your personal expenses with your pre-tax income. This results in your take-home pay being smaller, and subject to less tax.

Who can access salary packaging?

Salary packaging is open to any employee whose employer is eligible. The items you are able to salary package differ depending on your industry. It’s most common for employers to offer the salary packaging of superannuation and cars. Some industries also allow for the salary packaging of things like:

  • Car parking
  • Child care
  • Clothing
  • Financial advice
  • Groceries
  • Health insurance premiums
  • Laptop
  • Rates
  • Rent and mortgage
  • Utility bills

What are the benefits of salary packaging?

As noted, salary packaging allows you to pay common expenses out of your pre-tax salary. This reduces the taxable portion of your salary and allows you to pay less tax. Salary packaging is approved by the ATO (Australian Tax Office) so while it can sound too good to be true, it is true!

What is FBT and what does it have to do with salary packaging?

FBT stands for Fringe Benefits Tax. It’s a tax paid by employers on certain benefits they provide to their employees or their employees’ families or other associates.

Many of the items employees can salary package are considered Fringe Benefits including:

  • allowing an employee to use a work car for private purposes
  • giving an employee a discounted loan
  • paying an employee’s gym membership
  • providing entertainment by way of free tickets to concerts
  • reimbursing an expense incurred by an employee, such as school fees
  • giving benefits under a salary sacrifice arrangement with an employee.

In most organisations, packaging attracts FBT for the employer (which that employer usually then passes on to the employee). In those organisations, packaging is uncommon because there is marginal benefit for the employee.

Certain types of organisations are exempt from FBT which makes it more likely for them to offer packaging to their employees. The organisations include hospitals and not-for-profits. There is a limit on the FBT exemption in these organisations. For not-for-profits it’s $15,900 (per employee). For hospitals, it is $9,010 (per employee).

7 salary packaging tips

Ok, so that’s a quick primer about salary packaging. If you’re not using salary packaging and are curious about whether it can benefit you, talk to your financial advisor about it.

For those of you who are currently salary packaging, here are seven tips we’ve picked up over the years to get the most out of it:

Tip 1 – Think about the timing

Salary packaging companies like Maxxia and Paywise are often inclined to average your benefits over a twelve-month period. This may not necessarily be in your best interests. It might actually be better to receive (for example) your $15,900 mortgage/living allowance all tax-free in April/May/June (remember the FBT year starts in April). In some cases, it could be beneficial to wait until a new financial year commences in July.

Some examples where timing is important include:

  • If you were to stop work or move employers mid-year then you want to have maximised your cap before doing so.
  • If you maximise your cap as soon as possible, then salary packaging doesn’t factor in a decision to move roles if something better comes up.
  • You get that money in your bank account sooner. The money is better in your bank account than the ATO’s!
  • Say you start a new role on 1 January, you can maximise your benefits before the end of March and then again from 1 April.
  • In cases where people are returning to work and starting a role in May or June, they may have minimal taxable income in that year and could be better off waiting until July to maximise their annual packaging caps.

Tip 2 – Make sure you’re accessing all available benefits

Often we find clients are maximising their living expenses or mortgage packaging. But they might not realise they’re also eligible to claim a meal and entertainment benefit. This expense is capped at $2,650 p.a. And can be used towards restaurant and hotel costs.

Tip 3 – Access salary packaging through more than one employer

For example, if you’re a doctor working at Royal Perth Hospital and Sir Charles Gairdner Hospital, you can salary package twice!

Tip 4 – Use reimbursement rather than a card to access funds

This stops you from having to remember and worry about how much is on your meals and entertainment card and ‘will it decline?’ or ‘which account do I select?’

The other benefit is that you don’t need to carry around an expense card or pay additional fees associated with the card itself.

Reimbursement claims also assist in achieving your maximum salary packaging throughout the first few months of the year rather than placing $15,900 onto a living expense card and spending it over the course of the next twelve months.

One of the other things people sometimes get caught out on is that balances left on the card from 31st March to 1st April roll over and count towards your cap for the next year. So if you do decide to use a card, ensure that you spend every cent before the clock strikes midnight on 31 March.

Tip 5 – Understand how GST is accounted for by your packaging provider

Annual caps for pre-tax salary packaging differ based on whether the expense includes or excludes GST. It is important to speak with your packaging provider and understand whether they account for this, and if so, how.

Tip 6 – Consider taking advantage of novated leases where available

This gives you a GST saving on the purchase and also gives you access to a relatively short lease timeframe. There are costs involved in leasing the vehicle and it’s typically more expensive than just purchasing with cash that you have in a savings or offset account. With interest rates on the rise, the cost comparison is likely to change here and it may make the deal more or less appealing depending on your personal circumstances.

Tip 7 – Salary package a car in a way that doesn’t affect other entitlements

You can package a portion of your car pre and post-tax. If you package a large percentage pre-tax it will eat into your other entitlements like the living expense or mortgage-related packaging options.

Usually, we find it’s best to leave your existing packaging arrangements in place and package the car on top of this without dipping into your other allowances. This means you get the best of both worlds being able to claim your mortgage and a percentage of your car expenses as pre-tax as well.

Salary packaging is an awesome tool and if you aren’t already making use of it, it’s definitely worth investigating whether it is appropriate for your situation. If you’re already packaging, hopefully these tips and tricks might help you maximise the benefits you’re getting.


This is general advice and does not consider your particular circumstances. You should seek advice from HPH Solutions who can consider if the general advice is right for you.

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