Salary Sacrifice & Packaging

How Australian nurses can use salary packaging to reduce tax and keep more of what they earn.

$11,660

Public hospital cap

$18,550

NFP aged care cap

$4,500+

Potential yearly savings

What Is Salary Packaging?

Salary packaging (also called salary sacrificing) lets you redirect some of your pre-tax income toward everyday expenses such as rent, mortgage payments, bills, or groceries. Because that income is taken out before tax is calculated, you pay less Pay As You Go (PAYG) withholding and keep more of your pay in your pocket.

It works through a salary packaging arrangement — a formal agreement with your employer (or their packaging provider) where you nominate how much pre-tax income to sacrifice each pay cycle. The employer deducts that amount, pays it toward your chosen expenses, and your taxable income is reduced accordingly.

Importantly, salary packaging is legislated Australian Government policy administered under the Fringe Benefits Tax Assessment Act 1986. It is a permanent feature of the tax system for eligible employees — not a loophole, not a temporary scheme, and not something the ATO is looking to "crack down on." Provided you stay within the caps and follow the rules, it is completely above board.

💡 It's not a loophole. Salary packaging is enshrined in Australian tax law. The ATO publishes clear guidance on it. If you're eligible, you are entitled to use it.

Who Is Eligible?

Salary packaging is available to nurses working in specific types of healthcare organisations. Eligibility depends on who your employer is, not on your job title or registration status.

You are likely eligible if you work for:

Public hospitals — any state or territory public hospital or health service
Not-for-profit (NFP) aged care facilities — nursing homes, aged care homes run by charitable or religious organisations
NFP disability services — organisations providing supported accommodation, respite, or community access
NFP health-promotion charities — organisations such as the Heart Foundation, Cancer Council, or local community health centres with NFP status
Public benevolent institutions (PBIs) — hospitals and health services classified as PBIs

Most nurses working in public hospitals are employed by state health departments or Local Health Districts, which are classified as rebatable employers. Nurses in NFP aged care are employed by organisations that qualify as public benevolent institutions.

⚠️ For-profit hospitals and clinics are not eligible. If you work for a private for-profit hospital (e.g. some private surgical hospitals or for-profit aged care chains), you generally cannot salary package. There are very limited exceptions — check with your employer's payroll department.

Caps by Employer Type

The amount you can salary package depends on your employer's classification. Caps are set per FBT year (1 April – 31 March) and are indexed annually in line with the Consumer Price Index. The figures below reflect the current caps.

Employer Type	Living Expenses Cap	Meals & Entertainment Cap	Total Cap
Public hospital (rebatable employer)	$9,010	$2,650	$11,660
NFP aged care / PBI (capped)	$15,900	$2,650	$18,550
NFP charity (uncapped FBT exempt)	No cap	No cap	Unlimited (salary)
For-profit private hospital	$0	$0	Not eligible

Caps apply per employer. If you have two eligible jobs, you get separate caps for each.

The FBT Year: April to March

Salary packaging caps operate on the Fringe Benefits Tax (FBT) year, which runs from 1 April to 31 March. This is different from the financial year (1 July – 30 June) that most nurses are familiar with.

This matters because your packaging limit resets on 1 April, not 1 July. If you start a new packaging arrangement mid-year, your provider will pro-rate your cap based on how many days remain in the FBT year.

💡 Your FBT year cap resets on 1 April. If your provider says you're close to the cap in February or March, you only need to wait a few weeks for a fresh limit.

What Counts as Living Expenses?

Under the living expenses cap, you can pay for a broad range of everyday costs. Most salary packaging providers let you split this across multiple expense categories.

Expense Type	Examples	Notes
Rent	Private rental, share-house rent	Provide lease or rent receipt
Mortgage payments	Home loan principal & interest	Bank statement showing payment
Utilities	Electricity, gas, water, internet	Bill in your name
Groceries	Supermarket food & household supplies	Receipt or card statement
Credit cards	Minimum or full repayment	Statement showing payment
Health insurance	Private hospital or extras cover	Premium notice
Child care	Daycare, before/after school care	Invoice or receipt
Car expenses	Fuel, registration, insurance, servicing	Receipt or logbook for fuel
Personal loans	Car loan, personal loan repayments	Statement showing payment

You nominate specific expenses through your provider's portal or app. Most providers accept bank statements as proof of payment.

Meal Entertainment Rules

The meal entertainment component (up to $2,650) covers dining out — but the rules are specific. Meal entertainment is defined by the ATO as food and drink consumed in a social setting with 2 or more people. Takeaways and meals eaten alone at work do not qualify.

What qualifies as meal entertainment:

Sit-down restaurant meals with family or friends
Cafe lunches with colleagues outside work premises
Food and drink at bars, pubs, or clubs
Room service when travelling (if you would normally eat out)

What does NOT qualify:

Takeaway coffee, sandwiches, or meals eaten alone at your desk
Groceries or food prepared at home
Alcohol purchased from a bottle shop for home consumption
Food consumed while travelling for work (that is a separate work travel deduction)

⚠️ Meal entertainment is NOT for your everyday lunch. The ATO expects meal entertainment to involve a genuine social element — dining with others in a restaurant setting. Buying a sandwich and eating it in the break room does not count.

Salary Packaging Providers by State

Your employer will have an arrangement with one of several salary packaging providers. Each provider operates slightly differently, but all offer online portals, direct debit to your nominated accounts, and customer support.

Provider	States / Territories	Typical Users
Maxxia (SalaryPackagingPLUS for NSW Health)	NSW, ACT, TAS, NT	NSW Health nurses, some ACT Health
RemServ	QLD	Queensland Health nurses
Paywise	WA, SA	WA Health, SA Health nurses
Smart Salary (Smart)	VIC, national	VIC public health, some NFP aged care

Check with your employer's payroll department to confirm which provider your organisation uses. Most providers charge an admin fee (typically $5–$12 per fortnight), which is itself deductible through the arrangement.

How It Stacks with the Tax-Free Threshold

Salary packaging is separate from the tax-free threshold ($18,200). Here is how they interact:

The tax-free threshold means you pay $0 tax on the first $18,200 of your assessable taxable income
Salary packaging reduces your assessable taxable income further — every dollar you package saves you tax at your marginal rate
Your employer reports your salary-packaged amount on your payment summary, and it appears as a reportable fringe benefit on your tax return
Packaged amounts do not affect your tax-free threshold — they work together to lower your overall tax bill

In practice, if you earn $85,000 and package $11,660, your taxable income drops to roughly $73,340. You still receive the full benefit of the $18,200 tax-free threshold on top of that reduction.

💡 Salary packaging reduces your adjusted taxable income. This can also increase your eligibility for Family Tax Benefit and other means-tested government payments.

Estimated Tax Savings by Income Bracket

The table below shows how much tax a public hospital nurse (cap $11,660) could save depending on their income bracket. The savings increase at higher marginal rates because the packaged amount is shielded from tax at your top rate.

Annual Salary	Marginal Rate	Packaged Amount	Estimated Yearly Saving
$50,000	30% (incl. 2% Medicare)	$11,660	$3,498
$65,000	30% (incl. 2% Medicare)	$11,660	$3,498
$85,000	34% (incl. 2% Medicare Levy)	$11,660	$3,964
$100,000	34% (incl. 2% Medicare Levy)*	$11,660	$3,964
$120,000	39% (incl. 2% Medicare Levy)	$11,660	$4,547
$150,000	39% (incl. 2% Medicare Levy)	$11,660	$4,547
$190,000+	47% (incl. 2% Medicare Levy)	$11,660	$5,480

* Marginal rate of 30% plus 2% Medicare Levy, before the 37% bracket applies above $120,000. Figures are estimates only. Your actual savings depend on your total tax position, including the Medicare Levy Surcharge, HELP/HECS repayments, and other factors.

💡 NFP aged care nurses can save more. With the higher cap of $18,550, an NFP nurse on $85,000 could save around $6,307 per year.

How to Set Up Salary Packaging

Setting up salary packaging is straightforward, but it helps to be prepared. Follow these steps:

Confirm eligibility — Check with your employer's payroll team that your organisation is a rebatable employer or PBI. Ask which salary packaging provider they use.
Contact the provider — Phone or visit the provider's website. They will send you an application pack or guide you through an online enrolment.
Estimate your expenses — Work out roughly how much of your cap you want to use. Most providers let you start conservatively and increase later in the year.
Nominate expenses — Choose which expenses to package (e.g. your rent, credit card, or utility bills). You will need to provide supporting documents such as a lease agreement or a recent bill.
Sign the agreement — This formalises the arrangement with your employer. Once signed, your employer starts deducting your nominated amount each pay cycle.
Submit claims — Depending on your provider, you can submit claims through an app or online portal. Upload receipts, and the provider pays your nominated bills or reimburses you.

💡 Set up your packaging at the start of the FBT year (April) to maximise the benefit. Mid-year sign-ups mean your cap is pro-rated.

Common Questions

Can I salary package a car?

Yes — you can use your living expenses cap to pay for car loan repayments, fuel, registration, insurance, and servicing. However, a separate novated lease is a different arrangement that sits outside the standard caps and involves different tax treatment. Most nurses find it simpler to use their living expenses cap toward existing car costs rather than entering a novated lease.

What happens if I change jobs?

If you move to another eligible employer, your salary packaging resets. You need to set up a new arrangement with the new employer's provider. Your cap is pro-rated for the remainder of the FBT year based on your start date with the new employer.

Do I need to report salary packaging on my tax return?

Yes. Your employer will report packaged amounts as a reportable fringe benefit amount on your payment summary. This amount appears on your tax return but does not change your assessable income — it mainly affects the Medicare Levy Surcharge and some government benefit calculations.

Can I package super contributions too?

Salary sacrifice super contributions (an agreement to have your employer pay additional super from your pre-tax salary) are separate from the salary packaging caps discussed here. You can salary sacrifice super on top of your packaging arrangement, subject to the concessional contributions cap ($30,000 per year as of 2025-26).

⚠️ Salary sacrifice super is different. If you salary sacrifice super, those contributions count toward your $30,000 concessional cap. Going over triggers excess contributions tax. Talk to a tax professional before setting this up.

Summary

Salary packaging is one of the most valuable tax benefits available to Australian nurses. The key takeaways:

Public hospital nurses can package up to $11,660 per FBT year
NFP aged care/disability nurses can package up to $18,550 per FBT year
The FBT year runs 1 April – 31 March
Living expenses cover rent, mortgage, bills, groceries, credit cards, and more
Meal entertainment ($2,650 cap) covers restaurant dining with others — not takeaways
For-profit hospital nurses are not eligible
It is ATO-approved law — not a loophole

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