Not-for-profit salary packaging saving.
Annual tax saving
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A perk reserved for the not-for-profit sector
Most employees who try to pay personal bills from pre tax salary get caught by fringe benefits tax, which claws back the saving. Charities, public benevolent institutions, and public and not-for-profit hospitals are different. They hold an FBT exemption up to a capped amount, which means their staff can route everyday spending through pre tax salary and genuinely keep the tax that would otherwise have been withheld. If you work for one of these employers, this is one of the most valuable and most overlooked entitlements in your package. This calculator estimates the annual tax you save by packaging up to your cap.
Two caps, and which one is yours
The cap you qualify for depends entirely on your employer type. Staff of public benevolent institutions and registered charities get the higher cap of $15,900 of grossed up FBT value per year. Employees of public and not-for-profit hospitals and ambulance services get $9,010. These are the amounts of everyday expenses you can pay from pre tax income, covering things like rent, mortgage repayments, and general living costs through a packaging provider. Pick your employer type in the tool and it applies the correct cap automatically.
Why your saving is just your marginal rate times the cap
The mechanism is simple once you see it. Packaging $15,900 of expenses moves that money out of your taxable income. The tax you no longer pay on it is your marginal rate, including the 2 percent Medicare levy, multiplied by the cap. So the higher your tax bracket, the more the same cap is worth. Someone in the 30 percent bracket plus Medicare saves less than someone in the 37 percent bracket plus Medicare, even though both package the identical dollar amount.
This is also why the benefit is worth more to a full time professional than to a part time worker on a low income. A nurse on the 32 percent bracket plus Medicare captures a healthy saving, while a casual whose income sits near the tax free threshold saves little, because there is barely any tax to avoid in the first place. If your marginal rate is already low, weigh the saving against any administration fee before signing up, since a fee can swallow a thin benefit.
A charity worker on the 34.5 percent rate
Take a charity employee whose marginal rate including the Medicare levy is 34.5 percent, packaging the full $15,900 PBI cap.
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That is $5,486 a year in extra take home pay for spending you were going to make anyway. The bar below shows the packaged cap split into the tax you keep and the amount still spent on the bills themselves.
The reportable benefit catch worth understanding
There is a wrinkle the saving figure does not show. Salary packaged amounts usually appear on your income statement as a reportable fringe benefit. This grossed up figure does not increase your income tax, but it is counted in the income tests for several things: the Medicare levy surcharge, private health insurance rebate tiers, family assistance payments, child support, and HELP repayment obligations. For most people the tax saving comfortably outweighs any flow on effect, but if you are near a threshold for one of those tests, model it before assuming the full benefit. A practical tip: also ask whether your provider charges an administration fee, since a fee of a couple hundred dollars a year quietly erodes the saving shown here.
Frequently asked questions
Can I package this on top of salary sacrificing into super?
Yes, they are separate concessions. The FBT exempt cap covers everyday living expenses, while salary sacrifice into super uses the concessional contributions cap of $30,000. You can use both at once, and many not-for-profit employees do, to compound the tax benefit across two different mechanisms.
Does the meal entertainment cap stack on top of these caps?
For many health and charity employers, yes. A separate meal entertainment and venue hire benefit sits above the $15,900 or $9,010 general cap, adding further pre tax capacity. It has its own rules and is not included in this calculator, so check what your specific employer and packaging provider offer.
What happens if I only work part of the year for an eligible employer?
The cap is generally a full year amount tied to the FBT year, which runs from 1 April to 31 March. If you join partway through, your provider will usually pro rate the available cap to the remaining period, so you cannot package a full year's worth in a few months.