Not all salary packaging arrangements are equal. There is a big difference with the salary packaging offered to not-for-profit (NFP) employees as opposed to the salary packaging available to standard organisations and their employees.
If you work for a charity, a public or not-for-profit hospital or a public ambulance service, you generally have access to more salary packaging options and, here’s the real kicker, little or no fringe benefits tax (FBT) up to a cap. Charities alone employ around 1.54 million Australians, about 11% of the workforce. If you’re one of them, this is one of the most valuable tax concessions available to you, so it’s well worth understanding.
How not-for-profit salary packaging works
Under a salary packaging arrangement, you forgo part of your income in return for a benefit. The advantage is that you’re using your gross income (pre-tax income) to pay for something you would otherwise have to pay for from your after-tax income. The saving is effectively your marginal tax rate, which can be as high as 47 cents in the dollar once you include the Medicare levy.
Just to be clear, these concessions only apply to eligible NFP employers. If you work for a standard organisation, you may be able to salary package some items, but your employer pays FBT on them, and that FBT can make the whole arrangement pointless. You also won’t be able to package the same range of items.
It also matters which kind of NFP you work for. Public benevolent institutions, health promotion charities, public and not-for-profit hospitals and public ambulance services are FBT-exempt up to their cap. Other charities and NFPs (the ATO calls them rebatable employers) only get a partial FBT rebate, so packaging can still work there but is usually less generous. Your employer will know which group it’s in.
How much can you salary package?
The amount you can package is set by a capping threshold, and it depends on who you work for. The caps are set as grossed-up amounts:
- Public and not-for-profit hospitals and public ambulance services: $17,000 grossed-up, which works out to about $9,010 of actual expenses a year.
- Public benevolent institutions and health promotion charities: $30,000 grossed-up, which works out to about $15,900 of actual expenses a year.
These caps apply per FBT year, which runs from 1 April to 31 March. Your employer will be able to tell you the limit that applies to you.
Items you can salary package
Once you know your limit there are numerous expenses you can salary package including:
- Rent;
- Mortgage repayments;
- School Fees;
- Credit card repayments; or
- General livings expenses such as groceries, fuel and bills.
The exact list depends on your employer and their salary packaging provider, so check what’s on offer.
If you aren’t packaging an ongoing expense such as mortgage repayments (which go directly into the loan), expense items will typically be paid via a ‘salary packaging’ debit card. This is essentially a debit card that gets topped up by your employer each pay period with pre-tax income. You use it to pay your eligible bills. There are restrictions on withdrawing cash from this card so be mindful of that.
Meals and entertainment
On top of the cap for the items above, there’s a separate cap of $5,000 grossed-up (about $2,650 of actual spending) for meal entertainment and entertainment facility leasing. In plain English, that’s things like restaurants, cafes and holiday accommodation. It doesn’t include everyday living costs like groceries and liquor.
If you choose to use this benefit, you will get a second debit card for your meal and entertainment expenses.
Reportable fringe benefits
One of the implications of salary packaging is that an amount known as your ‘reportable fringe benefits amount’ will appear on your income statement in myGov. It’s shown when the taxable value of your benefits is more than $2,000 in an FBT year. This represents the grossed-up value of your salary packaging benefit. In other words, it works out how much income you would have to earn before tax, assuming you were on the top marginal tax rate. The following formula is used to calculate your reportable fringe benefit:
Reportable fringe benefit = Total taxable value of fringe benefit divided by (1 – FBT rate).
The FBT rate is the top marginal tax rate plus the Medicare levy, which is 47% for the FBT year ending 31 March 2027. You don’t need to do this calculation. Your employer does it for you.
Your reportable fringe benefits amount isn’t taxed, but it does need to be included in your tax return and it can affect a number of things. It’s included in the income tests for some government payments, such as Child Care Subsidy, so it can reduce what you’re entitled to. And if you have a HELP debt, your compulsory repayments are based on your repayment income, which includes your reportable fringe benefits. So your repayments will be higher under a salary packaging arrangement.
It is important you understand the implications of reportable fringe benefits prior to establishing a salary packaging arrangement.
Example of salary packaging
Now that we understand what can be salary packaged and how much, let’s look at a real life example of how this may work.
Mark is a public ambulance officer and has a salary packaging limit of $9,010. His gross annual salary is $150,000 and he plans to package the maximum amount of living expenses and meal entertainment. The table below compares the outcome for Mark with and without salary packaging, using 2026/27 tax rates including the Medicare levy. You can run your own numbers with our Income Tax Calculator.
| No salary packaging | Salary packaging | |
|---|---|---|
| Gross salary | $150,000 | $150,000 |
| Less packaged living costs | $0 | ($9,010) |
| Less meal entertainment | $0 | ($2,650) |
| Taxable income | $150,000 | $138,340 |
| Tax payable (including Medicare levy) | ($39,570) | ($35,023) |
| Less the same expenses paid after tax | ($11,660) | $0 |
| Left over after tax and expenses | $98,770 | $103,317 |
| Net benefit of packaging | $4,547 | |
| Reportable fringe benefits amount | $17,000 + $5,000 = $22,000 | |
As you can see, salary packaging leaves Mark about $4,547 a year better off. Most packaging providers charge an administration fee, so take that off the benefit when you compare.
Salary sacrifice to superannuation
You may notice that I haven’t talked about salary sacrifice to superannuation. That’s because it isn’t considered a fringe benefit. Every employee has the same opportunity to salary sacrifice to super, and it makes no difference whether you work for an NFP. It’s a separate strategy you can use on top of these concessions, and it’s worth looking at too.
Wrapping up
In summary, if you work for an eligible NFP, salary packaging up to your limit is well worth a look. It lets you pay for everyday expenses from pre-tax income, which is a massive bonus!
However, this comes with a warning. Be mindful of the reportable fringe benefits implications, and don’t spend more than you otherwise would just because it’s salary packaged. This is not an invitation to boost your living costs!
Last reviewed: 16 October 2026
