What is salary packaging?

Salary packaging is a simple way to increase your take home pay each fortnight by reducing your taxable income and therefore the amount of tax you pay.

Salary packaging reduces your gross salary by the value of the items packaged along with any associated costs, such as the employer’s share of the tax savings and the administration fee. The employee’s remaining salary, after the deduction of all such costs, is paid to the employee in cash (i.e. credited to the employee’s bank account) and is subject to normal PAYG withholding.

Why is salary packaging offered?

NSW Health offers salary packaging because the benefit is shared between the organisation and staff. Under the Fringe Benefits Tax Assessment Act 1986 (FBT Act) government employees whose duties are performed exclusively in or in connection with a public hospital are eligible to be provided with fringe benefits which are exempt from Fringe Benefits Tax up to a threshold cap of $17,000. Any amount salary packaged will be ‘grossed-up’ by 1.8868 (non-GST item) or 2.0802 (GST item) and providing this ‘grossed-up’ figure is below $17,000, there will be no fringe benefit tax liable.

How much can I claim?

Staff can claim up to $9,009 per fringe benefit tax year (1 April – 31 March) on items which are not subject to GST. This limit reduces to $8,172 for items which incur GST.

How is the saving calculated?

The tax saving for the employee is achieved as a result of their pre-tax salary being packaged in exchange for benefits which are exempt from FBT or benefits that attract a lower amount of FBT than the amount of PAYG tax applicable to salary.

Can I salary package if I work part time?

Yes. If you are employed on a part time basis and you pay tax, you can salary package.

Can I salary package if am on a temporary contract?

Yes. If you are hired on a temporary contract which is longer than three months, you can salary package.

When can I start benefiting from salary packaging?

Now. The salary packaging year runs from 1 April to 31 March (the same as the fringe benefit tax year) however you can start at any time. The sooner you start, the sooner you receive the benefits.

What if I have a HELP/HECS debt?

You can still benefit from salary packaging even if you have a HELP/HECS debt provided the tax benefit you receive is greater than the increased HELP/HECS debt.

What happens if I receive family tax benefits from Centrelink?

If you receive a family tax benefit, there should be no change in the benefit you receive from Centrelink. However you must advise Centrelink that a portion of your pay will be tax free and you will have a reportable fringe benefit.