Not for profit salary packaging: how it affects your gross pay, super and tax

What is not for profit salary packaging?

Not for profit salary packaging is an arrangement where you agree to forgo part of your gross salary in exchange for benefits provided by your employer. These benefits might include a car, laptop, mortgage payments, or even everyday living expenses. Because the benefits are often exempt from Fringe Benefits Tax (FBT) when provided by certain not for profit organisations, you can receive them without paying income tax on the sacrificed amount. This can increase your take-home pay compared to receiving the same value as cash salary.

Salary packaging is not a wage or salary level itself; it is a way to structure your pay. The underlying salary you earn is still subject to the same awards, agreements, and minimum wage laws. For example, if you work in health care and social assistance, the industry index is 97.8 (annualised $106,064), but your actual pay may be higher or lower depending on your role and classification. Packaging can then boost your net income.

How salary packaging interacts with gross pay

Your gross pay is the total amount you earn before any deductions. When you salary package, your gross pay remains the same for the purpose of calculating your super guarantee and any award entitlements, but your taxable income is reduced. For instance, if your annual gross salary is $80,000 and you package $15,000, your taxable income becomes $65,000. Your employer still reports your gross pay as $80,000 for super purposes.

The Salary Index measures full-time adult ordinary-time earnings, which is a benchmark for comparing pay levels. The national line is $108,352 per year (index 100). If your gross pay is $80,000, your index is about 73.8. Packaging does not change that index because the index is based on gross ordinary-time earnings, not taxable income.

Superannuation and salary packaging

Under Australian law, your employer must pay super guarantee contributions of 12% (from 1 July 2026) on your ordinary time earnings. Ordinary time earnings include any salary sacrificed amounts. So even if you package part of your salary, your super contributions are calculated on your pre-packaged gross pay. This is a key advantage: you reduce your tax now while still building your retirement savings on the full amount.

For example, using the same $80,000 salary with $15,000 packaging, your employer pays 12% of $80,000 ($9,600) into your super. If you had taken the $15,000 as cash, your super would still be $9,600, but you would pay more tax on the extra cash. Packaging lets you keep more of your net pay while maintaining the same super contribution.

Tax implications

Salary packaging reduces your taxable income, which can lower your marginal tax rate. For the 2026–27 income year, resident tax rates (excluding Medicare) are:

• $0 – $18,200: nil
• $18,201 – $45,000: 15%
• $45,001 – $135,000: 30%
• $135,001 – $190,000: 37%
• $190,001 and over: 45%

Plus a 2% Medicare levy on your taxable income.

If your gross salary is $80,000, you are in the 30% bracket. By packaging $15,000, your taxable income drops to $65,000, still in the 30% bracket, but you save 30% tax plus 2% Medicare on that $15,000 – a saving of $4,800. If you could package enough to drop into the 15% bracket, the saving would be even greater. However, caps on tax-free benefits limit how much you can package.

Not for profit salary packaging is especially valuable because many NFPs are eligible for FBT exemptions. The most common cap for public benevolent institutions is $15,900 per year for general benefits, plus an additional cap for certain entertainment benefits. These caps are set by the ATO and can change.

Industry and state context

Many not for profit workers are in health care and social assistance (index 97.8) or education and training (index 105.5). These indices are close to the national average. If you work in a state with a higher index, such as the ACT (109.9) or WA (106.9), your gross pay may be above the national line, making packaging even more beneficial because you are in a higher tax bracket. Conversely, in Tasmania (index 88.6), gross pay is lower, so the tax saving from packaging may be less dramatic.

You can compare your pay using the states page or see how your industry stacks up on the industries page. Remember that salary packaging is a separate benefit – it does not change your gross pay index.

Practical considerations

Not all not for profit employers offer salary packaging. Even if they do, the types of benefits and the caps vary. Some employers allow packaging of mortgage payments, rent, or even school fees. Others restrict benefits to cars or electronic devices. Always check with your employer or your enterprise agreement.

Salary packaging can also affect your eligibility for certain government benefits, such as Family Tax Benefit or the Medicare levy surcharge, because those are based on your taxable income. A lower taxable income might increase your family assistance but could also reduce your entitlement to some concessions.

For more detailed guidance on pay rates and conditions, see the pay guides or explore topics related to salary and benefits. The Salary Index is a useful tool to see where your gross pay sits against the national average, but it does not account for packaging.

Summary

Not for profit salary packaging is a valuable way to reduce your tax and increase your take-home pay, while keeping your super contributions based on your full gross salary. It is not a salary level, so it does not have an index figure, but it can make a significant difference to your net income. Always consider the caps, your employer’s policies, and your overall financial situation before entering a packaging arrangement.