- Published on
Salary Packaging & Fringe Benefits Tax (FBT) Guide Australia (2026–27)
- Authors
- Name
- Charlotte Smith
- https://x.com/CharlotteSmithAU
Salary Packaging & Fringe Benefits Tax (FBT) Guide (2026–27)
Salary packaging—also known as salary sacrificing—is an ATO-approved financial arrangement where you agree to receive part of your remuneration package in the form of non-cash benefits or expenses paid directly from your pre-tax salary, rather than receiving 100% of your earnings as standard gross wages.
By reducing your gross taxable income, salary packaging lowers the amount of income tax and Medicare levy withheld from your paycheck, boosting your net take-home wealth. However, understanding how Fringe Benefits Tax (FBT) applies to different expense categories and employer sectors is essential.
1. How Salary Packaging Works
When you salary package, an agreed portion of your gross pre-tax income is redirected by your employer to pay for eligible benefits (e.g. novated car lease, superannuation contributions, work laptops, or mortgage repayments) before PAYG withholding tax is deducted.
The Tax Advantage Illustrated
Imagine an employee earning $120,000 annually who packages $10,000 of eligible work expenses or pre-tax super contributions:
- Without Salary Packaging: Taxable income is $120,000. Marginal tax rate on top earnings is 30% + 2% Medicare = 32%. Total tax paid on that top $10,000 is $3,200.
- With Salary Packaging: Taxable income drops to $110,000. The $10,000 is deducted before income tax.
- Immediate Income Tax Savings: $3,200 in your pocket.
2. What Is Fringe Benefits Tax (FBT)?
Fringe Benefits Tax (FBT) is a tax paid by Australian employers on the value of certain fringe benefits provided to their employees (or employees' family members) in respect of their employment.
- Current Statutory FBT Rate: 47% (reflecting the highest marginal tax rate of 45% + 2% Medicare Levy).
- FBT Year: Runs from 1 April to 31 March (distinct from the standard Australian financial year).
Because employers are liable for FBT at 47%, standard commercial employers will generally only allow salary packaging for benefits that are FBT-exempt, concessionally taxed, or qualify for the "otherwise deductible" rule.
3. High-Value Salary Packaging Items in Australia
| Expense Category | FBT Treatment | Who Benefits Most? |
|---|---|---|
| Additional Superannuation (Concessional) | FBT-Exempt (Taxed at 15% in super fund) | Anyone earning over $45,000 wanting retirement wealth. |
| Electric Vehicles (EV Novated Lease) | 100% FBT-Exempt under Treasury EV Discount (Zero FBT up to luxury car threshold) | Full-time/part-time employees buying eligible Battery Electric or PHEV cars. |
| Work-Related Laptops, Tablets & Phones | FBT-Exempt (1 portable device per FBT year primarily used for work) | Professionals, trades, and remote employees. |
| Self-Education & Professional Courses | FBT-Exempt (if directly related to current employment duties) | Nurses, engineers, accountants, teachers. |
| Relocation & Fly-In-Fly-Out (FIFO) Expenses | Concessional / Exempt | Mining, construction, and regional workers. |
4. Special Concessions: Healthcare & Not-For-Profit Employees
Employees working in Australian public healthcare, medical research, charitable organizations, and public benevolent institutions (PBIs) enjoy massive statutory salary packaging privileges:
- Public & Non-Profit Hospital Employees: Can salary package up to $9,010 per FBT year on everyday living expenses (mortgage repayments, rent, private school fees, utility bills) completely FBT-free.
- Public Benevolent Institutions (PBIs) & Charities: Can salary package up to $15,900 per FBT year on everyday living costs.
- Meal Entertainment & Venue Hire Cap: In addition to the general cap, hospital and charity staff can package an extra $2,650 per FBT year for restaurant dining, catered functions, and holiday accommodation.
5. Reportable Fringe Benefits & Government Thresholds
While salary packaging reduces your taxable income, if the total taxable value of your fringe benefits exceeds $2,000 in an FBT year, your employer must report the grossed-up value on your end-of-year income statement as a Reportable Fringe Benefits Amount (RFBA).
Your RFBA is not subject to income tax, but it is factored into income tests for:
- HECS-HELP debt repayment income calculations.
- Medicare Levy Surcharge (MLS) thresholds.
- Family Tax Benefit (FTB) and Child Care Subsidy (CCS) assessments.
- Child support payment liabilities.
6. Calculate Your Packaging Tax Savings
Model your tax reductions and compare packaging options with our free tools:
- Salary Packaging Calculator — Estimate take-home pay boost across corporate and healthcare sectors.
- Novated Lease Calculator — Model EV and ICE vehicle pre-tax lease savings.
- FBT Calculator — Calculate employer fringe benefits tax liability and grossed-up values.