How Non Profit Salary Packaging Works With Award Rates and the National Minimum Wage

Understanding Non Profit Salary Packaging

Non profit salary packaging is a tax concession available to employees of certain not-for-profit organisations, including public benevolent institutions (PBIs), health promotion charities, and public hospitals. It lets you sacrifice part of your pre-tax salary for eligible benefits like rent, mortgage payments, car expenses, or meal entertainment. The key benefit is that the sacrificed amount is not subject to income tax, which can increase your take-home pay. However, it is important to understand that salary packaging does not change your gross wage—the figure used in the Salary Index.

For the 2026–27 financial year, the general cap for PBI employees is $15,900, plus an additional $2,650 for meal entertainment and other fringe benefits. If your employer is a health promotion charity or a public hospital, the cap is lower. The Australian Taxation Office (ATO) administers these rules, and your employer must be registered to offer salary packaging.

Awards Versus the National Minimum Wage

Australia’s wage system is built on a combination of the national minimum wage and modern awards. The national minimum wage from 1 July 2026 is $26.44 per hour, or $1,004.90 per week, annualised to $52,255. That gives an index figure of 48.2, meaning it is just under half the national line of 100 (full-time adult ordinary-time earnings of $108,352 per year).

Modern awards set higher minimum rates for specific industries and occupations. For example, the Retail Award has a minimum hourly rate above the national minimum wage, and the Social, Community, Home Care and Disability Services Industry Award (SCHADS) covers many non-profit workers. Award minima rose by 4.75% from 1 July 2026, with an entry-level award floor of $25.74 per hour. Most award classifications pay more than the national minimum wage, and many non-profit employees are covered by awards that reflect the value of their work.

The how the index works page explains that the Salary Index compares gross ordinary-time earnings to the national line. So if you are on a SCHADS award at a classification that pays $70,000 per year, your index is about 64.6—well above the national minimum wage but below the average. Your gross pay is set by your award or enterprise agreement, not by salary packaging.

How Non Profit Salary Packaging Affects Your Pay (But Not Your Index)

Because the Salary Index uses gross earnings before tax, non profit salary packaging has no direct impact on your index figure. Your gross wage remains the same whether you salary package or not. What changes is your taxable income, and therefore your take-home pay.

Consider a community worker earning $70,000 gross. Without salary packaging, their taxable income is $70,000. Using the 2026–27 resident tax rates (nil up to $18,200, 15% on the next $26,800, 30% on the next $90,000, plus 2% Medicare levy), the tax on $70,000 is roughly $11,167 plus Medicare, leaving about $57,433 take-home. If they salary package $15,900, their taxable income drops to $54,100. The tax on $54,100 is about $6,997 plus Medicare, giving take-home of about $46,003 from the reduced salary, plus the value of the packaged benefits (e.g., $15,900 spent on rent). Their total disposable income effectively rises because the packaged amount is tax-free.

This tax saving does not affect the gross earnings reported to the ABS for the Average Weekly Earnings survey. Your employer still reports your ordinary-time earnings before sacrifice. So the industries page shows health care and social assistance at index 97.8, slightly below the national line. Many non-profit workers are in that industry, and their gross earnings determine the index. Salary packaging is a separate benefit that improves net income without moving the index.

Practical Considerations for Non-Profit Employees

If you work for a non-profit organisation, check whether your employer is eligible to offer salary packaging. The most common eligible employers are PBIs, health promotion charities, and public hospitals. Some religious or community service organisations also qualify. Your employer can confirm their status and the caps that apply.

Salary packaging does not affect your award entitlements. You must still be paid at least the minimum rate under your award or the national minimum wage. The packaged amount comes from your salary above that minimum. For example, if your award rate is $30 per hour and you work 38 hours, your gross weekly pay is $1,140. You cannot salary package below the award minimum, but you can package part of the amount above it.

Also note that salary packaging can interact with government benefits like Family Tax Benefit or the Medicare Levy Surcharge. Because your taxable income is lower, you may become eligible for more benefits or a lower surcharge. However, the ATO treats packaged amounts differently for different purposes. It is wise to use the ATO’s online calculators or speak to a tax professional.

For more context on how your pay compares nationally, see the states page, which shows state-by-state index figures. For example, New South Wales has an index of 101.2, while Tasmania is 88.6. Non-profit workers in Tasmania may have lower gross earnings but can still benefit from salary packaging to boost take-home pay.

Summary

Non profit salary packaging is a valuable tax concession that increases your net income without changing your gross wage. Your position on the Salary Index is determined by your award or agreement rate, not by whether you salary package. Understanding both your award entitlements and the tax rules helps you make the most of your pay. For more details, explore the topics section on salary packaging and award rates.