Salary packaging for nurses: how it works and who qualifies

Most of this guide is about deductions, the costs you claim back on your return. This chapter is about something different, and for a lot of nurses it is worth more than every deduction combined. Salary packaging lets you pay for some of your everyday costs out of your pay before tax is taken out, which lowers the income you are taxed on. It works because of who employs you: public and not-for-profit hospitals are exempt from a tax called fringe benefits tax, and that exemption is passed on to you. It is not a deduction you claim in July. It runs through your employer's payroll, all year.

How it works

You agree with your employer to receive part of your pay as benefits instead of cash. Your employer pays for those benefits from your pay before tax is worked out, so the income you are taxed on goes down. Because you were never taxed on that money, you cannot also claim a deduction for it. Salary packaging and a work deduction are two different things, and the same dollar cannot be both.

The cap that makes it big for nurses

Because public and most not-for-profit hospitals are exempt from fringe benefits tax, you can package a set amount of everyday living costs each year free of that tax. The everyday-expenses cap is currently around $9,010 of your pay a year, which the ATO expresses as a grossed-up figure of $17,000 (the two numbers describe the same cap: one is the cash you package, the other its grossed-up value). On top of that sits a separate benefit for meal entertainment and venue hire, currently capped at around $2,650. Nurses commonly package things like mortgage or rent payments and everyday bills up to the cap. These figures are set by law and have held for years, but they can be changed, so treat them as current rather than fixed. What decides whether you can do this is your employer, not your job title: a nurse at a public or not-for-profit hospital can usually access the exemption, while a nurse at a private, for-profit hospital usually cannot. If you are not sure which yours is, your payroll team or the packaging provider can tell you.

The catch worth understanding first

Salary packaging is not automatically the right move for everyone, and this is the part that catches people out. The amount you package still shows on your income statement as a reportable fringe benefits amount. You are not taxed on it, but it is added back when the government works out several income tests. That means it can affect your Medicare levy surcharge, how much you repay on a HELP or HECS debt, your private health rebate, and income-tested family payments like Family Tax Benefit and the Child Care Subsidy. For most nurses packaging still comes out well ahead, but if you are close to a HELP repayment threshold, or your family relies on income-tested payments, the gain can be smaller than it looks. It is worth getting the sums checked for your own situation before you start.

How you actually set it up

Salary packaging is run through a provider your employer nominates, not through your tax return. Your hospital will point you to its provider, and providers such as Maxxia, Smartsalary and RemServ are common in the sector. The provider charges an administration fee, usually taken from your pre-tax pay. You arrange it with them and payroll, and it runs automatically from there. There is nothing to claim at tax time for the packaged amount.

Novated leases and super, briefly

Two other pre-tax options are worth knowing exist. A novated lease is a way to package a car through your employer, and it is available more widely than the hospital exemption. Salary sacrificing into super is a separate arrangement that puts extra pay into your superannuation before tax. Both have their own rules and their own catches, and super in particular is a decision worth taking advice on, so this guide only flags that they exist.

The bottom line

Salary packaging is the one lever in this whole guide that can outweigh every deduction, and for a nurse at a public or not-for-profit hospital it is worth understanding properly. It lowers the pay you are taxed on, up to a yearly cap, through your employer rather than your return. Check that your employer qualifies, understand how the reportable amount touches your other entitlements, and get the numbers looked at for your own circumstances before you commit.

General information only, and not tax or financial advice. Salary packaging is an arrangement with your employer, not a deduction you claim at tax time, and whether it suits you depends on your circumstances, including how the reportable fringe benefits amount affects things like your Medicare levy surcharge and HELP repayments. Before acting, speak to your employer's nominated salary-packaging provider and a licensed financial adviser or registered tax agent. See the ATO or Moneysmart for the general rules.