What is salary packaging?
Salary packaging/sacrifice is an arrangement where your employer pays for certain expenses on your behalf out of your pre-tax salary. This ATO-approved and government-driven incentive reduces your taxable income and increases your disposable income every pay.
Please note: Any employee can salary sacrifice provided their employer is willing to offer the benefits.
When an employee gets paid, there can be numerous deductions that get taken out of their pay before tax is calculated.
These deductions usually include things like voluntary payments to super, or salary sacrifice items.
Once these amounts have been deducted from your gross pay, the government then calculates the tax payable. The smaller the amount you have earned, the smaller the amount you are taxed.
Using pre-tax dollars to pay for certain items reduces the tax you pay, resulting in you taking home more pay!