Financial Services

Salary packaging Fringe Benefits Tax (FBT) Policy

Further information

Overarching Fringe Benefit Tax Policy


Salary packaging refers to the situation where an employer allows an employee to exchange salary for fringe benefits.

Policy statement

A taxpayer may be able to reduce their tax bill by sacrificing salary in lieu of employment-related benefits which are not assessable in the individual's hands but which are taxable benefits.

The tax benefit arises where the fringe benefit provided by the employer is exempt or taxed concessionally under the FBT regime. Taxpayers on the highest marginal rate of tax (45 per cent on earnings over $180,001 for the 2012-13 tax year) will derive the greater saving from salary packaging concessionally taxed or exempt fringe benefits. This is because the actual fringe benefits tax payable in respect of these benefits will be below the taxpayers' marginal rate of 45 per cent.

The Commissioner considers that only prospective salary sacrifice arrangements will be affected. Salary to which the individual is already entitled can not be packaged. In this case the employee will be assessed on the total value of the fringe benefits.

The main advantage of salary packaging is that the employee may be able to increase their 'net disposable income' as opposed to the employee paying for the benefits in after-tax dollars. It also provides the employee with flexibility in structuring their remuneration package.

There are a number of exempt and concessionally taxed benefits; however, the University presently offers superannuation (an exempt fringe benefit) and other fringe benefits. Refer to Salary Packaging from Human Resources for more information.