What is Salary Packaging?

Pay for everyday items using pre-tax dollars.

Salary Packaging makes it possible to pay for selected everyday items and expenses from your pre-tax salary.

Not only can it reduce your taxable income, Salary Packaging aims to put more money in your pocket. Salary Packaging is an ATO approved method of restructuring your salary by reducing the tax you pay and increasing your net take home pay.

SALARY

TAX

Living Expenses

Without salary PACKAGING

SALARY

Living Expenses

TAX

With salary PACKAGING

So how does salary packaging work?

Salary Packaging means your wage arrives in two parts, the first is your ‘sacrificed’ amount and the second is your usual wage paid by your employer.

When you Salary Package, money for certain personal expenses (called benefits) is deducted or ‘sacrificed’ from your salary before tax is taken out. You then only pay tax on the remaining portion of your salary.

The packaged amount plus the remainder result in an increased take home salary, making salary packaging an attractive option.

*These tax savings are an estimate only. Each person’s circumstances will determine how much tax they can save.

For example: Bill earns $60,000 per year working for a charitable organisation that allows him to sacrifice $15,900 a year (or the first $611.53 per fortnight) towards his fixed mortgage repayments. When the employer deducts the fixed capped amount of $611.53 per fortnight in pre-tax form, it effectively reduces Bill’s tax by $210 a fortnight or $5,485 annually*. Please note that Bill’s ability to salary package is dependent on the industry he works in and the package his employer provides.

What is Salary Packaging?

Pay for everyday items using pre-tax dollars.

So how does salary packaging work?

NEXT: What Can I Salary Package?

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