How does salary packaging reduce my take-home tax?

Salary packaging, also called salary sacrifice, allows you to receive part of your remuneration as non-cash benefits rather than taxable salary. Common examples include novated car leases, laptop computers, and — for employees of hospitals, charities, and councils — living expenses up to a fringe benefits tax-exempt cap. Because the packaged amount is deducted before income tax is calculated, it reduces your taxable income and therefore the tax withheld. This calculator reduces your gross salary by the packaging amount before applying the income tax brackets, giving you an estimate of the tax saving.

Australian Paycheck Calculator

Useful next calculations

Use the Australian Income Tax CalculatorContinue with the related australian tax question this result raises.
Use the Superannuation CalculatorContinue with the related superannuation & retirement question this result raises.

Rates and sources, 2026–27

2026–27 resident PAYG illustration with the 15% first positive band, LITO, Medicare levy and Superannuation Guarantee at 12%.

Rates used for 2026–27
Band or figure	Rate
SG rate	12%
Tax-free threshold	$18,200
15% band	to $45,000
HELP marginal threshold	$69,528

Source: ATO — individual income tax rates. Source checked for 2026–27.

When to use this calculator

Before accepting a pay change, bonus or contribution arrangement.
When you want a simple take-home or conversion estimate before payroll or filing.
When you need to convert between hourly, monthly and annual pay.
When you want to compare two pay scenarios using the same assumptions.

A worked example

These are the example figures the calculator opens with.

A worked example
Input	Value
Annual Gross Salary (A$)	A$85,000
Pay Frequency	Fortnightly (26/yr)
Employer Super Rate (%)	12%
Salary Packaging / Year (A$)	A$0

For those figures the calculator returns:

Take-home per pay period: A$2,587.69
Annual take-home: A$67,280.00
Employer super: A$10,200.00
Effective tax rate: 20.80%
HECS-HELP repayment/yr: A$0.00

How to read your results

Effective Tax Rate

Review this figure alongside gross income and the local tax rules that apply to you. It is a planning estimate, not a filing result.

Method & assumptions

This calculator computes Australian resident take-home pay by applying the 2026–27 federal income tax brackets, the Low Income Tax Offset (up to $700), the 2% Medicare Levy (with phase-in for lower incomes), the Medicare Levy Surcharge for those without private hospital cover, and HECS-HELP compulsory repayment rates. Salary packaging is treated as a pre-tax reduction to gross income before any brackets are applied, reflecting the standard ATO treatment of salary sacrifice arrangements. Employer superannuation at the nominated SG rate is calculated separately on gross salary and displayed as an additional component of total remuneration rather than a deduction from take-home pay.

This estimate is for general planning only. It does not include reportable fringe benefits, investment income, rental income, or state-based payroll taxes. HECS-HELP repayment is an approximation based on annual income and may differ from the exact per-pay withholding amount used by your employer. Confirm your exact withholding with your payroll team or use the ATO’s official tax withheld calculator for employer-facing figures.

Common mistakes

Using an assumption that is not supported by a current local quote, bill, statement or official source.
Treating a generic estimate as a lender, provider, payroll or tax authority decision.
Mixing monthly and annual inputs without converting them consistently.
Testing only one scenario instead of checking how a cautious assumption changes the result.

What to do next

Run a second scenario with a cautious assumption so you can see the downside clearly.
Compare the result with the related calculators below before making a decision.
Check current local rules, eligibility and provider terms before applying or committing money.
Keep a record of the assumptions so you can update the estimate when a quote, bill or pay figure changes.

Questions people ask

The Medicare Levy is a 2% charge on taxable income that funds Australia’s public health system. Most Australian residents pay it in full. Singles earning $28,011 or less pay nothing, while those between $28,011 and $35,013 pay a reduced rate as the levy phases in (the latest figures the ATO has published). The Medicare Levy Surcharge (MLS) is a separate additional charge of 1% to 1.5% that applies to higher-income earners who do not hold private hospital cover. Holding an eligible hospital cover policy exempts you from the MLS, which is why this calculator asks about private health insurance.