5 Ways Salary Packaging Can Save You Money (2025)

Salary packaging lets you sort out some day‑to‑day costs before the tax office touches your pay. When you’re your employer to put part of your gross wage toward approved expenses such as extra super, a novated car lease, or a personal loan repayment. This money leaves your pay packet first, the rest of it counts as your income, so you pay less tax and see more in your account each payday. It’s an easy way to stretch every dollar in your paycheck without changing your regular spending habits.

How Salary Sacrifice Works

Your employer can cover certain costs straight from your gross pay before tax is taken out. Because that money leaves first, your taxable income drops and you hand over less to the tax office. Canberra likes this arrangement because it nudges workers toward goals it sees as important, like building up super and paying for extra training.

Eligibility Requirements and Options

Most Australian employees can access some form of salary packaging. However, the available options vary significantly between industries and employers. Public sector employees, healthcare workers, and charity employees typically enjoy the most comprehensive packages.

5 Key Financial Benefits of Salary Packaging

1. Reduce Your Income Tax Liability

Salary packaging directly reduces your taxable income. When you package $10,000 worth of expenses, you lower your taxable salary by the same amount. This reduction means you pay less income tax and keep more of your earnings.

Tax Bracket Optimisation Strategies

Strategic salary packaging can move you into a lower tax bracket. For example, if you earn $91,000 annually, you pay 32.5% tax on income above $90,000. By packaging $2,000, you drop entirely into the 30% bracket and save additional tax on that threshold amount.

Calculating Your Potential Tax Savings

Estimate your tax saving by multiplying the amount you salary‑package by your marginal tax rate. On a salary of $80,000, packaging $5,000 cuts roughly $1,650 from your annual tax bill. If you package several benefits the calculations get complicated, so speak with a registered tax agent to maximise your return.

2. Boost Your Superannuation Contributions

Ask payroll to send a slice of your pre tax pay straight into your super. Inside the fund it is taxed at 15 percent, so more of each dollar stays invested and keeps working for you.

2025 Concessional Contribution Limits

For the 2024 to 2025 year the concessional cap is $30,000. That figure covers both your employer’s contributions and anything you salary sacrifice. If you are 50 plus with less than $500,000 in super you can carry forward unused cap room from earlier years.

Long-term Retirement Benefits

Extra contributions compound faster than you might expect. Putting in an extra $5,000 every year for 20 years could add more than $200,000 to your retirement pool. You also win from day one because the contribution tax is 15 percent, not the 32.5 percent or higher income tax that money would usually face.

3. Maximise Car Savings Through Novated Leasing

Novated leasing bundles your car purchase and running costs into a single pre-tax payment. This three-way agreement between you, your employer, and a finance company delivers substantial savings on vehicle ownership.

GST Exemptions and Benefits

Novated lease arrangements eliminate GST on both the car purchase and ongoing expenses. For a $50,000 vehicle, this GST saving alone amounts to approximately $4,545. Additionally, you avoid GST on fuel, servicing, insurance, and registration costs throughout the lease period.

Total Cost of Ownership Analysis

With a novated lease you can cut about 15 to 25 percent off the total cost of owning a car compared with buying one outright. The saving comes from skipping GST, trimming your income tax, and tapping fleet prices that private buyers rarely see. Just make sure you allow for any fringe benefits tax that might apply and have a plan for what happens when the lease wraps up.

4. Access Tax-Effective Everyday Expenses

Many employers allow packaging of routine living expenses up to specific annual limits. These arrangements effectively make everyday spending cheaper by using pre-tax dollars.

Industry-Specific Packaging Options

Different sectors offer varying packaging opportunities:

• Healthcare workers can often package meal costs, accommodation, and professional development
• Charity employees typically access the most generous arrangements, including rent and mortgage payments
• Corporate employees might package laptops, mobile phones, and professional memberships

FBT Exemptions and Annual Caps

Not every benefit attracts Fringe Benefits Tax. If you work for a public hospital, charity or religious body you can package up to 15 900 dollars a year with no FBT at all.

5. Improve Financial Planning and Cash Flow

Salary packaging builds a money routine for you. The set and forget structure encourages steady saving and makes day to day planning simpler.

Automated Savings Advantages

Your employer deducts the money before payday so you pay yourself first. Because the cash never hits your account you are less tempted to spend what was meant for super or car repayments.

Enhanced Budget Management

Big costs leave your salary upfront which makes the rest of your budget clear. You can see exactly how much is left for rent groceries and the occasional night out.

Advanced Salary Packaging Strategies

Combining Multiple Benefit Types

Experienced salary packaging users often combine several arrangements simultaneously. You might package extra superannuation contributions alongside a novated lease and professional development expenses. However, FBT caps and contribution limits require careful planning to avoid penalties.

Optimal Timing for Implementation

Kick off salary packaging at the start of the financial year so you collect a full year of savings. Joining midway can complicate FBT numbers because of pro rata limits. Check your career plans before locking yourself into a multi year deal such as a novated lease.

Important Considerations and Compliance

Eligibility Criteria and Restrictions

Salary packaging is not available to every worker. Your employer must run a scheme, and the menu of benefits differs by industry and organisation. Government agencies, hospitals and charities usually offer the widest range.

Fringe Benefits Tax Implications

FBT applies to many packaged benefits at 47% of the benefit’s value. This high rate can eliminate packaging advantages unless you work for an FBT-exempt employer or stay within exempt thresholds.

Impact on Government Benefits and Payments

Salary packaging lowers your taxable income, and that smaller figure can change how Centrelink and other agencies work out your benefits. Child support, study allowances and other income‑tested payments may move up or down once your assessable income drops. Check the rules and do the maths before you commit so you are not caught out later.

Managing Cash Flow During Transition

Financial Planning for Setup Periods

Salary packaging arrangements often take several pay cycles to implement fully. During this transition period, you might face temporary cash flow challenges while maintaining existing expenses and setting up new systems.

Bridging Finance Solutions with CashPal

CashPal understands that Australians sometimes need flexible lending solutions during financial transitions. Whether you’re covering upfront costs for a novated lease or managing cash flow while new arrangements take effect, CashPal offers quick access to funds designed for real Australian financial situations.

Quick Access to Funds During Transitions

Setting up salary packaging can create short-term financial gaps. CashPal provides straightforward applications and fast approvals to help bridge these periods while your new arrangements deliver long-term savings.

Frequently Asked Questions

Can I modify my salary packaging arrangements?

Most arrangements allow annual reviews and modifications. However, some benefits like novated leases involve multi-year commitments that limit flexibility.

What happens when changing employers?

Salary packaging arrangements typically end when you leave your job. Novated leases can sometimes transfer to new employers, but this requires their agreement to continue the arrangement.

How does salary packaging affect mortgage applications?

Lenders consider your pre-packaging gross salary when assessing borrowing capacity. However, some banks may reduce their assessment based on packaged amounts, so discuss this with mortgage brokers early.

Next Steps

1. Discuss options with your employer’s human resources team – they can outline specific benefits available in your organisation
2. Research approved packaging providers – your employer may have preferred suppliers with established processes
3. Calculate potential savings – use online calculators to estimate your tax benefits
4. Seek professional advice – financial advisers can help optimise your overall strategy
5. Plan your timing – starting arrangements at the right time maximises annual benefits

Start by discussing available options with your employer’s human resources team. They can outline specific benefits available in your organisation and connect you with approved packaging providers.