If you’re earning a decent wage but feel like tax is eating up too much of your income, salary packaging could be the break you need. And if you’re wondering how much it could actually save you, that’s where a salary packaging calculator comes in handy.
In this guide, we’ll walk you through how salary packaging works in real-world terms, who it benefits, how to calculate it properly, and what tools you can use to get accurate figures, especially if you’re packaging a car or other pre-tax benefits.
What Is Salary Packaging and How Does It Work?
Put simply, salary packaging (sometimes called salary sacrifice) is when your employer agrees to pay for certain expenses using your pre-tax income, before personal income tax rates kick in.
That means your taxable income drops, and your take-home pay goes up.
Let’s say you earn $90,000 annual gross salary and your employer allows you to salary package a $15,900 benefit (we’ll explain this cap shortly). Your new taxable income becomes $74,100, not $90,000. That can shave off thousands in tax every year.
Eligible expenses might include:
- A novated lease for a car (including electric vehicles)
- Rent or mortgage payments
- Super top-ups (superannuation pre-tax contributions)
- School fees for private education
- Work-related devices or professional memberships (trade unions)
The list varies depending on your employment industry and whether your organisation is classed as a public benevolent institution or a not-for-profit.
Who Benefits Most from Salary Packaging?
You’ll see the biggest benefits if you:
- Work for a not-for-profit, aged and community care organisation, or an ambulance service
- Earn above the middle income bracket
- Want to lease a car via a novated lease, especially an EV (these are currently fringe benefits tax-exempt up to a certain threshold)
- Have out-of-pocket costs that can be paid before tax
Organisations like care public benevolent institutions, medical research institutes, and territory government organisations often offer more generous limits. These employees may qualify for up to $15,900 in salary packaging that’s completely FBT-free.
How to Use a Salary Packaging Calculator (with Real Example)
Let’s bring this to life.
Example: Alex, working in aged care
- Annual gross salary: $85,000
- Employer: Registered not-for-profit
- Wants to package: $15,900 for living expenses
- Medicare: Eligible for income Medicare levy reduction
Alex enters these details into a reliable salary packaging calculator. He ticks the box for FBT-exempt employer and enters his tax file number, pay frequency, and whether he’s packaging any concessional contribution tax-related items.
Result:
The calculator shows Alex will reduce his taxable income to $69,100. This shifts him into a lower tax bracket and saves over $4,800 in tax annually.
That’s real money back in his pocket, without any change to his job or hours worked.
If Alex also packages a fully electric car through Vehicle Solutions Australia’s novated lease program, he may save even more thanks to GST savings shown on lease payments and running costs.
Factors That Affect Your Salary Packaging Outcome
Here’s what can impact your savings:
1. Employer’s Accounting Methods
Each employer has different internal rules. Some may pass on input tax credits, while others don’t. Some determine superannuation based on your full salary, while others base it on taxable income. It’s crucial to account for your employer’s accounting policies before making decisions.
2. Income Bracket and Offsets
The impact of salary packaging depends on your income tier. You’ll benefit more if you sit in a higher bracket but are still eligible for low-income tax offsets or low-income Medicare levy reductions.
3. Your Industry
Those working in medical research institutes, ambulance services, or aged and community care sectors can access specific caps that offer fringe benefits tax exemptions. If you’re outside these sectors, your employer may still allow packaging, but FBT could apply.
4. GST and Fringe Benefits
For items like cars, GST savings can apply—but only if your employer passes the credit to you. That’s why packaging a vehicle with Vehicle Solutions Australia makes sense—they simplify the process and clearly show the actual savings.
Why Professional Advice Still Matters
Even the best packaging calculator won’t account for everything. You should:
- Ask your payroll officer to clarify your packaging limit
- Get taxation advice if you’re packaging multiple items
- Check how your superannuation pre-tax contributions affect your concessional contribution tax cap
- Understand whether items are reportable fringe benefits (these can affect loan applications or child support assessments)
Every case is different. That’s why it’s smart to seek professional advice tailored to your situation, not just rely on online tools.
FAQs About Salary Packaging and Calculators
What is $15,900 salary packaging?
This is the maximum tax-free amount employees of approved not-for-profits can package for living expenses. It’s exempt from fringe benefits tax and applies to sectors like aged care, ambulance services, and public benevolent institutions.
How much can I get from salary packaging?
Savings vary based on your taxable income, packaged amount, and whether your employer is FBT-exempt. Use a salary packaging calculator to get an estimate. For someone earning $90,000, packaging $15,900 could mean over $4,000 in tax savings.
How to calculate taxable income with salary packaging?
Subtract your packaged benefits from your annual gross salary. If you package $15,900 from an $85,000 salary, your taxable income becomes $69,100. Just be mindful of any superannuation pre-tax contributions you’re also making.
Is salary packaging available to private sector employees?
Yes, but it depends on what your employer allows. While not-for-profits offer the most generous caps, private businesses can still offer novated leases, extra super, laptops, and work tools as part of your salary arrangement.
Does salary packaging affect my superannuation?
Potentially. Some employers calculate super based on your original annual gross salary, while others use your taxable income post-packaging. Always check how your employer determines this and seek professional advice if in doubt.
Use a Salary Packaging Calculator to Unlock Tax Savings
If you’re earning a decent salary and still watching tax take a bite out of your paycheck, salary packaging could change the game. Using a salary packaging calculator takes the guesswork out of what you can save.
Whether you want to package an EV through a novated lease, cover school fees, or bump up your super, tools like this give you a clearer view of your financial options.
At Vehicle Solutions Australia, we make this process simple. Our team works with both employees and employers to structure competitive, compliant salary packaging arrangements—including 100% tax-free electric vehicles with full transparency and support.
Want to see how much you can save? Try our salary packaging calculator and explore your options today.
