What is Salary Packaging?

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What is Salary Packaging?

Salary Packaging enables you to spend a portion of your pre-tax salary on everyday expenses, such as Rent and Mortgage Repayments, groceries and even school fees.
In Australia, all money earnt up to $18,200 is tax free, known as the Tax-Free Threshold. Every dollar earnt after this is subject to Income Tax: anywhere up to 45c per dollar, depending on your income! The more Income Tax you pay, the less you see in your pay cheque.

Salary Packaging can be looked at as an extension of this idea: every dollar that you salary package is another dollar of your own salary that you don’t have to pay tax on!
Simply put, you can spend less time budgeting and more on the things you love.

How Salary Packaging Works

Every time you get paid, a portion of your salary is taken before it is taxed and used to pay for selected expenses.
The amount of your pre-tax salary that can be used to pay for these expenses is called your “capped limit.” Your capped limit allowance varies depending on the type of organisation that you work for.

Salary Packaging works around the Fringe Benefits Tax Year (FBT Year) which happens from 1st April to 31th March each year. Your capped limit allowance will reset each year on the 1st of April.

Without Salary Packaging

Without Salary Packaging

With Salary Packaging

With Salary Packaging