Salary Packaging Australia: How NFP and Healthcare Workers Cut Their Tax Bill

Most Australians know about salary sacrifice into super. Far fewer know about salary packaging — a different arrangement available exclusively to employees of certain not-for-profit (NFP) and healthcare organisations that can save significantly more in tax.

The difference: ordinary salary sacrifice reduces taxable income by diverting pre-tax salary into super or a novated car lease. Salary packaging under the FBT-exempt rules lets eligible employees package everyday living expenses — rent, mortgage repayments, grocery cards, utilities — completely tax-free, with no Fringe Benefits Tax applied. For a nurse on $85,000, this arrangement can save $3,500–$5,500 per year without changing a single work routine.

If you work for a hospital, aged care provider, disability organisation, community health service, or registered charity and you're not using salary packaging, you're leaving thousands in tax savings unclaimed every year.

Who qualifies for FBT-exempt salary packaging?

The arrangement is only available to employees of organisations that are exempt from — or receive rebates on — Fringe Benefits Tax. These fall into two main categories:

Public Benevolent Institutions (PBIs) Registered charities that provide relief to people in need: disability services, aged care, community services, homeless shelters, some healthcare organisations. The FBT-exempt cap for PBI employees is $15,900 per FBT year.

Public and not-for-profit hospitals and ambulance services Public hospitals and ambulance services that are not registered PBIs have their own separate cap of $9,010 per FBT year. Some public hospitals are also registered as PBIs — their employees may access the higher $15,900 cap. Check with your employer's HR team which cap applies to you.

Other eligible employer types include religious institutions, some government bodies, and certain scientific research organisations.

How to find out if you're eligible: Ask your employer's HR or payroll department. They will confirm whether the organisation is a PBI or registered FBT-exempt employer, and which cap applies. Many employers actively promote the benefit as a recruitment and retention tool.

What is the FBT-exempt cap and how does it work?

The cap is the maximum amount you can package in living expenses under the FBT exemption. For PBI employees: $15,900 per FBT year (1 April to 31 March). For hospital employees: $9,010 per FBT year.

Within this cap, you can package any eligible personal expenses — effectively having your employer pay these costs from your pre-tax salary. The result: those expenses are removed from your taxable income.

Example — nurse on $85,000 packages $15,900:

	Without packaging	With packaging ($15,900)
Gross salary	$85,000	$85,000
Salary packaged (tax-free)	—	$15,900
Taxable income	$85,000	$69,100
Income tax (approx.)	$19,717	$14,502
Medicare levy (2%)	$1,700	$1,382
Total tax	$21,417	$15,884
Annual tax saving	—	$5,533

That $5,533 saving is real money — equivalent to a $6,500+ pay rise in pre-tax terms, with no change to your salary or job. The employer administers the arrangement; you simply redirect spending through it.

What can be packaged?

Eligible living expenses that can go through a salary packaging arrangement (up to the cap):

Core living expenses:

Mortgage repayments (principal and interest on your principal place of residence)
Rent payments
Council rates, strata levies, body corporate fees
Utilities (electricity, gas, water)
Home insurance

Financial expenses:

Personal credit card repayments (up to the cap)
Personal loan repayments

Food and groceries:

Groceries via a packaging card (a dedicated visa/mastercard preloaded from your pre-tax salary — you spend it at supermarkets and food retailers)

Vehicle-related:

Registration and insurance (personal vehicle)

Additional allowance — meal entertainment: Eligible employers also offer a separate $2,650 per FBT year cap specifically for meal entertainment: restaurant meals, cafe expenses, and in some cases accommodation. This is additional to the $15,900/$9,010 living expenses cap.

What cannot be packaged:

Super contributions (use salary sacrifice instead — these are separate)
Costs already receiving another tax benefit
Work-related expenses (these belong in your tax return as deductions)

Use our Income Tax Calculator to see how packaging the full $15,900 reduces your taxable income and tax bill at your salary level.

How the mechanism works

Salary packaging is administered through a salary packaging provider — a company contracted by your employer to manage the arrangement. Common providers include Smartsalary, RemServ, Maxxia, Eziway, and AccessPay.

The process:

Confirm eligibility with your employer's HR/payroll team
Register with your employer's packaging provider (online, takes 10–20 minutes)
Choose what to package — mortgage/rent, expenses, or a packaging card
Your salary is reduced by the packaging amount before tax is calculated
The provider pays your nominated expenses directly (for mortgage/rent) or loads a card (for general expenses)

Your payslip will show a reduced gross salary and a packaging component. This is normal and expected.

Most arrangements are set up for the FBT year (1 April to 31 March). You can typically start or change your packaging arrangement at any time, though some employers have cut-off dates.

The RFBA impact: the one thing to watch

Packaged amounts appear on your Payment Summary / Income Statement as a Reportable Fringe Benefits Amount (RFBA). The RFBA is not taxable income — but it IS counted for "adjusted taxable income" calculations that affect:

HECS/HELP repayment: RFBA is added to your repayment income. If you're below the HECS repayment threshold, packaging won't push you above it — but if you're already above, the RFBA increases your repayment calculation slightly.
Medicare Levy Surcharge: RFBA counts toward your MLS income threshold.
Child support assessments: RFBA is included in the parent's income for child support calculations.
Centrelink: RFBA is counted for income tests on various Centrelink payments (Family Tax Benefit, childcare subsidy, etc.).

For most employees, the RFBA impact is a minor consideration — the tax saving easily outweighs it. But if you're close to a Centrelink income test threshold or have a child support assessment, calculate the net effect before starting packaging.

Salary packaging vs salary sacrifice: what's the difference?

This distinction confuses many people:

	Salary sacrifice to super	FBT-exempt salary packaging
Who can use it	Any employee (through employer)	Only NFP/hospital employees
What it covers	Super contributions	Living expenses, groceries, mortgage
Tax treatment	Concessional (15% tax inside super)	FBT-exempt — 0% tax
Annual cap	$32,500 (concessional contributions)	$15,900 or $9,010
FBT applies?	No (super is exempt)	No (packaged under exempt cap)
Can you do both?	Yes — they're independent	Yes

The most tax-efficient outcome for eligible employees is to use both:

Salary sacrifice to super (up to the $32,500 concessional cap less employer SG)
FBT-exempt salary packaging (up to $15,900 in living expenses)
Plus the additional $2,650 meal entertainment allowance

Done together, a nurse on $85,000 could reduce their taxable income by $20,000+ through these combined strategies — a tax saving of $7,000–$9,000 per year.

Frequently asked questions

Does salary packaging reduce my super contributions?

No — the SG is typically calculated on your gross salary before packaging, not your reduced packaged salary. However, confirm with your HR team: some employment contracts calculate SG on the post-packaging amount, which could slightly reduce your employer's super contributions. If this applies, the tax saving usually still far outweighs the super reduction.

Can I package my mortgage if it's a joint mortgage?

Yes — most packaging providers allow packaging of mortgage repayments on a jointly-held property. The packaged amount comes from your salary, and you direct it toward your mortgage account. You'll typically need to provide the BSB, account number, and confirmation of the mortgage.

Does salary packaging affect my home loan borrowing capacity?

Potentially, in two ways. First, your gross salary appears reduced on payslips (showing the post-packaging amount), which some lenders use in their assessment — though most recognise RFBA and gross it up. Second, the RFBA appears on your payment summary, which some lenders may include or exclude. A mortgage broker can identify which lenders are most packaging-friendly for your situation.

Can I use salary packaging if I work part-time at an NFP?

Yes. Eligibility is based on employment type (you must be an employee of a qualifying employer), not hours. Part-time employees at PBI/hospital employers can package up to the same caps as full-time employees.

My hospital says it's not a PBI — can I still package?

Public hospitals and ambulance services that aren't registered PBIs still qualify for the $9,010 cap under a separate FBT concession. This is still a significant tax benefit. Confirm with your HR team exactly which cap applies to your employer category.

FBT-exempt salary packaging caps in this article are current for the 2025-26 and 2026-27 FBT years ($15,900 for PBI employees, $9,010 for public hospital employees). The FBT year runs from 1 April to 31 March. RFBA calculations and means-testing impacts vary by individual circumstances. This article is general information only and does not constitute financial advice.