Salary Packaging Health: How It Affects Your Pay When Comparing Job Offers

What Is Salary Packaging Health?

Salary packaging health is a workplace benefit that lets you use part of your pre-tax salary to pay for eligible health and medical expenses. Instead of receiving the full gross salary and then paying tax on it, you sacrifice some salary directly to cover costs like hospital bills, dental work, optical expenses, or private health insurance premiums. The sacrificed amount is not subject to income tax, so your taxable income drops and you keep more of what you earn.

This arrangement is most common in the health care and social assistance sector, where the Salary Index sits at 97.8 – slightly below the national line of 100. Employers in that sector often use salary packaging to attract staff despite offering gross pay that may be below the national average. For example, a registered nurse earning $95,000 gross (index 87.7) could package $9,000 in health expenses, reducing taxable income to $86,000. The net benefit depends on their tax bracket, but it can add thousands to take-home pay.

How Salary Packaging Health Changes the Way You Compare Job Offers

When you read a job ad, the headline salary is almost always gross – before tax, super, and any packaging. If one ad says $100,000 with salary packaging health and another says $105,000 without, the first offer may actually be better for your pocket. To compare fairly, you need to estimate the net pay after packaging.

Start by checking where the gross salary sits on the Salary Index. The national line is $108,352 a year (index 100). A $100,000 salary has an index of 92.3. But if you can package $10,000 in health costs, your taxable income falls to $90,000. Using the 2026–27 resident tax rates (tax-free threshold, 15% on income from $18,201 to $45,000, 30% to $135,000, plus 2% Medicare levy), the tax on $100,000 is roughly $24,467, leaving $75,533 net. On $90,000, tax is about $20,867, leaving $69,133 net – but you also had $10,000 of health expenses paid from pre-tax money. So your total spending power is $69,133 plus $10,000 in health costs = $79,133, which is $3,600 more than the $100,000 job without packaging.

Of course, the exact numbers depend on your personal situation, but the principle is clear: salary packaging health can make a lower gross salary more valuable.

Using the Salary Index with Salary Packaging

The Salary Index is based on gross full-time adult ordinary-time earnings. It does not account for salary packaging, because packaging varies by employer and individual. So if a job ad says $95,000 with packaging, the index is still 87.7 (95,000 / 108,352 × 100). But you can mentally adjust: if packaging is worth, say, $8,000 in tax savings, the effective gross equivalent might be around $103,000 – index 95.0. That puts it closer to the national line.

When comparing offers across states, remember that packaging benefits are the same nationally, but state indexes differ. For example, Western Australia has an index of 106.9 ($115,825 annualised). A WA job at $110,000 (index 101.5) with packaging might be even more attractive than a Victorian job at $106,000 (index 97.8) without packaging.

Tax and Super Considerations

Salary packaging health reduces your taxable income, which lowers the tax you pay. However, the super guarantee (12% from 1 July 2026) is calculated on your ordinary time earnings before salary sacrifice. So your super contributions stay the same as if you had not packaged. That is a key advantage: you get the tax saving on health expenses without reducing your retirement savings.

Also, many health-related salary packaged items are exempt from fringe benefits tax (FBT) if provided by a public hospital or certain not-for-profit employers. That means the employer does not have to pay FBT, so they are more willing to offer the benefit. For private sector employers, some health items may still be FBT-exempt, but caps apply.

What to Look for in a Job Ad

When scanning ads for salary packaging health, look for phrases like “salary packaging available,” “not-for-profit salary packaging,” or “health sector benefits.” If the ad does not mention it, ask during the interview. Even if the gross salary seems modest, packaging can lift the real value.

Remember the national minimum wage is $26.44 per hour (index 48.2). A job at that level is unlikely to offer salary packaging, but award-covered roles in health care may have enterprise agreements that include it. Check the pay guides for your industry.

Final Thoughts

Salary packaging health is a powerful tool for boosting your take-home pay, especially in sectors where gross salaries are below the national line. When comparing job offers, do not just look at the headline number. Estimate the net benefit of packaging and see where the effective salary sits on the Salary Index. That gives you a true picture of your earning power.

For more detail on how the index works, see how the index works. And if you are in a specific industry, check the industries page for benchmarks.