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What Are Salary Packaging Companies and How Do They Affect Your Job Offer Comparison?
Learn how salary packaging companies work in Australia and how to compare job offers that include salary packaging using the national salary index.
Salary packaging companies administer pre-tax benefit arrangements that can increase your take-home pay, but the effect depends on your salary level and expenses. The national index (100) is $108,352; packaging can shift your effective tax rate.
What Are Salary Packaging Companies?
When you read a job ad and see "salary packaging available" or "salary packaging company", it means the employer offers a way to pay for certain expenses with pre-tax income. A salary packaging company is a third-party administrator that handles the paperwork for these arrangements. Common examples include novated leases for cars, laptops, or additional super contributions. The key benefit: you reduce your taxable income, so you pay less tax and Medicare levy.
How Salary Packaging Companies Fit Into Job Offer Comparisons
The writing angle here is reading a job ad and comparing offers. One offer might say "$95,000 plus salary packaging"; another says "$100,000 cash". Which is better? You need to convert the packaged offer into a cash-equivalent figure. The salary packaging company will take a fee (often a few hundred dollars a year), but the tax saving can be significant.
Step 1: Understand Your Tax Bracket
Using the 2026–27 resident tax rates (excluding Medicare):
- $0–$18,200: nil
- $18,201–$45,000: 15%
- $45,001–$135,000: 30%
- $135,001–$190,000: 37%
- Over $190,000: 45%
Plus a 2% Medicare levy. So if you earn $95,000 cash, your marginal rate is 30% + 2% = 32%. Every dollar you package saves you 32 cents in tax.
Step 2: Estimate the Tax Saving
Suppose you package a car lease worth $10,000 per year. Your taxable income drops from $95,000 to $85,000. You save 32% of $10,000 = $3,200 in tax and Medicare. Your effective cash salary becomes $95,000 – $10,000 (the cost) + $3,200 (tax saved) = $88,200. But you also have the car, so your total compensation is $95,000 cash plus a car worth $10,000 – but you paid for it with pre-tax money. For comparison, you can think of the cash-equivalent salary as $88,200 plus the car, or simply compare the after-tax cash you have.
Step 3: Use the Salary Index
The Salary Index sets 100 as full-time adult ordinary-time earnings: $108,352 per year (ABS, May 2026). To compare offers, calculate the index of your cash-equivalent salary. For $88,200: (88,200 / 108,352) × 100 ≈ 81.4. That tells you the offer sits below the national average. If the other offer is $100,000 cash, its index is 92.3. So the cash offer is higher relative to the national line.
But salary packaging can also include items that save you money you would otherwise spend post-tax, like a laptop for work. That makes the packaged offer more attractive than the index alone suggests.
What the Reference Data Tells Us
The on-site reference gives us benchmarks: national minimum wage $52,255 (index 48.2), state indices (NSW 101.2, VIC 98, etc.), and industry indices (Mining 154.7, Retail 75.9). When you see a job ad, you can quickly gauge where the cash salary sits. For example, a retail job offering $60,000 cash has an index of 55.4, well below the retail industry average of 75.9. That might be low for the sector.
Salary packaging companies don't change the index of your base salary, but they affect your take-home pay. The pay guides and how the index works explain more about using the index to compare roles.
Awards, Super, and Tax Considerations
If your job is covered by a modern award, salary packaging cannot reduce your base rate below the award minimum. The award minimums rose 4.75% from 1 July 2026. For example, the entry-level award floor is $25.74 per hour. Your cash salary must at least meet that.
Super guarantee is 12% from 1 July 2026, calculated on your ordinary-time earnings (not your packaged salary). So packaging does not reduce your super. However, if you salary sacrifice extra into super, that counts toward the concessional cap ($30,000 in 2026–27).
Tax: Salary packaging reduces your taxable income, so you may drop into a lower bracket. But beware of Fringe Benefits Tax (FBT) on some items like cars. Many salary packaging companies handle FBT, but it can affect the overall saving. Always ask the employer or the company for a quote.
Practical Tips for Reading Job Ads
- Look for "salary packaging company" or "salary packaging available". If the ad says "total remuneration package $110,000 including car", ask for the cash component.
- Check if the employer pays the packaging company fee. Some deduct fees from your package.
- Use the states page to see if your location affects the index. For example, WA index 106.9 is above national; a $100,000 salary there is below state average.
- For more topics, see topics.
Conclusion
Salary packaging companies are a tool to boost your take-home pay, but they require careful comparison. Convert offers to cash-equivalent, apply the salary index, and consider your tax bracket. The national line of $108,352 is your anchor. With the right approach, you can see whether a packaged offer truly beats a straight cash salary.
Questions people ask
What is a salary packaging company and why do employers use them?
A salary packaging company is a third-party provider that administers salary sacrifice arrangements for employees. Employers use them to offer benefits like novated leases or electronic devices without having to manage the paperwork themselves. The company handles the deductions, payments, and compliance with tax rules. For you, it means you can pay for certain items with pre-tax income, reducing your taxable income and increasing your take-home pay.
How do I compare two job offers when one includes salary packaging?
First, separate the cash salary from the packaged benefits. Estimate the tax you would save on the packaged amount using your marginal tax rate (see the 2026–27 rates in the reference). Add that saving to the cash salary to get an 'effective cash salary'. Then compare that figure to the other offer. Use the salary index: divide the effective cash salary by $108,352 and multiply by 100 to see where it sits relative to the national line. For example, an effective cash salary of $90,000 gives an index of about 83.
Does salary packaging affect my superannuation or award entitlements?
Salary packaging generally does not reduce your super guarantee (12% from July 2026) because the guarantee is calculated on your ordinary-time earnings, not your packaged salary. However, if you salary sacrifice into super above the guarantee, that counts toward the concessional contributions cap ($30,000 in 2026–27). For award-covered employees, salary packaging cannot reduce your base rate of pay below the award minimum. Always check with your employer or the Fair Work Ombudsman if you are under an award.