Salary packaging for support workers: 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 support worker at the right employer it can be 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: registered charities and not-for-profit providers get an exemption 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. The catch is that it only works for some support workers, so the first thing to sort out is whether it is even open to you.
Who this is actually open to
Salary packaging is only for employees, and only where the employer qualifies. That splits support workers three ways:
- Employed by a not-for-profit or charity provider. Most large aged-care and disability providers are registered charities, and their employees can usually access the exemption. This is where the benefit lives.
- Employed by a for-profit provider. A private, for-profit employer does not get the exemption, so packaging the everyday-expenses cap is generally not available, even though the job is the same.
- A sole trader on your own ABN. If you invoice for your work rather than being paid wages, you have no employer to package through, so this arrangement is not open to you at all.
If you are not sure which of these you are, sorting that out comes first, because it changes everything else too. Our chapter on whether you are employed or a sole trader walks through how to tell, and your payroll team can confirm whether your employer is a registered charity.
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, and why it is generous in this sector
Because registered charities are exempt from fringe benefits tax, an eligible employee can package a set amount of everyday living costs each year free of that tax. In the charity sector the everyday-expenses cap is currently around $15,900 of your pay a year, which the ATO expresses as a grossed-up figure of $30,000 (the two numbers describe the same cap: one is the cash you package, the other its grossed-up value). That is higher than the cap for hospital staff. On top of it sits a separate benefit for meal entertainment and venue hire, currently capped at around $2,650. People commonly package things like rent or mortgage 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.
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. Support work is often lower-paid and many workers rely on those family payments, so it is genuinely worth checking: for most people packaging still comes out ahead, but if your household leans on income-tested payments the gain can be smaller than it looks, or occasionally not worth it. Get 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 employer will point you to its provider, and providers such as Maxxia, Smartsalary, RemServ and community-sector specialists like CBB and Eziway are common among not-for-profit employers. 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 charity 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
For a support worker employed by a not-for-profit or charity provider, salary packaging is the one lever in this whole guide that can outweigh every deduction. It lowers the pay you are taxed on, up to a yearly cap, through your employer rather than your return. Work out first whether it is open to you, because it is only for employees of an eligible employer, then 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, HELP repayments and family payments. 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.