In the Employment Services sector, we come across it often as charities and benevolent organisations, or not-for–profit organisations (NFP's) are entitled to present it. What is confusing is that not everyone receives the same benefits as each organisation uses it in different ways. What is the same however is that it has benefits for both employers and employees.

The benefits include:

  • providing increased net income for the employees - maximising the take home salary by saving tax
  • improving staff retention and attraction by offering a competitive edge, and bringing salaries in line with private organisations
  • making the decision to work for a NFP organisation more financially rewarding, not just intrinsically rewarding
  • helping the organisation become an Employer of Choice

So what is Salary Packaging?Put simply, it involves using the pre-tax income wherever possible to pay for day to day expenses thereby reducing income tax which increases disposable income.

Employees who choose to salary package, pay for items ("benefits") from pre-tax salary. Since they are paid for before PAYG tax is incurred, employees actually use less of their overall salary to pay for them. Employees of organisations classified as NFP's are permitted to obtain $30,000 of the gross up value of the benefit items packaged tax free.