When it comes to squeezing the most out of your salary, salary packaging - also known as salary sacrifice - has been gaining attention for good reason. Whether it’s helping you pay less tax, bundling the cost of buying and owning a car into your pay, or letting you expense certain living costs pre-tax, it all sounds pretty awesome.
But is it actually worth it? And is salary packaging a fringe benefit you need to be cautious about? Let’s find out!
What is Salary Packaging & How Does It Work?
The mechanics are fairly simple in concept:
You agree with your employer to package specific items.
Your payroll makes a pre-tax deduction for those items.
Depending on the item, fringe benefits tax may apply, be reduced, or be exempt.
If you do it right, you’ll keep more of your pay in your pocket. If not, you can end up worse off through fees, unsuitable inclusions, or Fringe Benefits Tax (FBT).
What Can I Salary Package?
This depends on your employer and your industry. Below we’ve listed the most common things you can package.
Vehicles via a Novated Lease
New or used, with extra savings for EVs
Running costs can be bundled: fuel/charging, rego, insurance, servicing, tyres, roadside assistance, cleaning, and more.
Eligible EVs priced under the luxury car tax threshold ($91,387) are currently FBT-exempt - meaning you save tens of thousands on the cost of your car over the life of the lease, which is why EV packaging has surged.
Super Contributions
Extra employer contributions using pre-tax dollars.
Useful for long-term wealth building and reducing taxable income.
Note: Be careful to watch concessional caps to avoid excess contributions.
Portable Work Devices
Laptops, tablets, phones and accessories that are primarily for work are often FBT-exempt.
Your employer may require evidence of work use.
Living Expenses in Specific Areas
Not-for-profits and some government or health employers often allow capped living expense packaging.
Typical inclusions: mortgage or rent, utilities, school fees, meal and entertainment cards.Caps and rules vary, so check your employer’s policy.
Remote Area Benefits
If you live and work in eligible remote areas, housing assistance and certain travel can be packaged with generous concessions.
Rule of thumb: the closer an item is to work necessity or a legislated concession, the more likely it is to deliver value.
Is Salary Packaging a Fringe Benefit?
Yep, salary packaged items usually fall under the Fringe Benefits Tax rules. That doesn’t mean you’ll always pay FBT, though. Some benefits are exempt, some attract concessions, and some use employee contributions to neutralise FBT. A well-structured arrangement can keep costs in check and maintain the tax advantage. You should always confirm how FBT is being handled for each item, because that’s the line between a smart move and an expensive one.
Is Packaging a Car Worth It?
This is the question most people care about. Salary sacrificing your car through a Novated Lease can be a huge tax advantage for you, especially if you:
Are in a middle or higher tax bracket ($135,001 – $190,000+)
You want a newer car with predictable running costs.
You do a steady amount of driving each year.
You value budgeting simplicity and want to avoid the shock of big lump-sum bills.
How Novated Leasing Saves You Money
Tax Savings
Lease payments and running costs are deducted from pay before you get taxed, reducing your taxable income. Over the life of your lease, usually 3 to 5 years, this can add up to tens of thousands of dollars.
GST Treatment
You usually won’t pay GST on the car price and eligible running costs within the arrangement, which effectively lowers the cost.
Bundled Costs
Fuel or charging, rego, insurance, servicing, cleaning, and replacement tyres are combined into a single payment, which is taken out of your pay before tax is applied. This makes managing your running costs much simpler and helps to avoid the shock of large lump sum costs.
Buying Power
Specialist consultants can negotiate fleet-level pricing. You get professional sourcing rather than retail walk-in prices.
EV Exclusive Incentives
FBT exemption for eligible EVs under the luxury car tax threshold is a major boost. For many employees, this is the tipping point that makes an EV the best value choice.
What To Avoid
Poor Structure
If FBT isn’t managed correctly, such as incorrect post-tax contributions, assuming an ineligible EV is FBT-exempt, misaligning deductions with the FBT year, or the plan relies on unrealistic kilometre assumptions, you could end up worse off. A skilled Novated Leasing Consultant will help you avoid this.
Job changes
A Novated Lease is tied to your employment. If you change jobs, the lease can usually be re-novated, but you need to know the process and any costs involved.
Fees and insurance
Packaging fees and bundled insurance need to be transparent. You should be sure to ask for a full schedule so you can compare apples with apples.
Apples-to-apples comparisons
If your alternative is keeping a fully paid, older vehicle for many years, that may be cheaper in total dollars. The trade-off is less predictability and potentially higher maintenance risk.
How to Sanity Check The Numbers
Get a written quote that clearly shows purchase price, residual value when the lease ends, interest rate or cost of funds, fees, insurance, and all running cost budgets.
Model realistic annual kilometres. Overstated fuel or servicing assumptions make a plan look better than it will perform.
Compare against two alternatives: a standard car loan and keeping your current vehicle.
If you are considering an EV, run the same model for a comparable petrol car to see the combined impact of FBT settings and running costs.
When is salary packaging worth it overall?
You’ll most likely come out ahead if you:
Sit at an income level where pre-tax deductions will actually lower your tax.
Select benefits with exemptions or concessions, such as eligible EVs or work-related devices.
Have access to living expense caps through a not-for-profit or public sector employer.
Prefer budgeting stability over ad-hoc bills.
Use a provider that is transparent on fees, sources vehicles competitively, and manages FBT correctly.
Salary Packaging is less likely to suit you if you change jobs frequently, plan to exit a lease early, or prefer to hold onto an older car for a long time.
Busting Myths
“Only high earners benefit.”
Tax is certainly impacted more for those on a higher income, but well-chosen, FBT-efficient items can help across a wide range of salaries.
“It is too complicated.”
The tax rules are complex, but your setup doesn’t have to be. A good provider will map out your options, explain the FBT treatment, and give you clear numbers.
“You always pay more for your car with a lease.”
It’s important to make the right comparison here. The benefits of a novated lease come with the total cost of ownership after tax and GST effects, not just the sticker price or weekly deduction.
So, Brass Tacks - Is Salary Packaging Worth It?
For thousands of Australians, yes. Done right, salary packaging can reduce your tax, simplify your budgeting, and make a better vehicle more attainable. The sweet spot is choosing benefits that are FBT-efficient, running a clean comparison against your alternatives, and partnering with a provider that is transparent about every cost. If you are weighing up a novated lease in particular, an apples-to-apples model will quickly show whether the value is there for you.
If you’d like a personalised breakdown based on your income, expected kilometres and vehicle shortlist, Easi’s skilled Novated Leasing specialists can build a tailored quote that shows the outcome on your take-home pay.
If you’re ready to see how much you could save, get in touch with us or request a quote today!
