Salary packaging is one of the most valuable financial perks available to Australian healthcare workers — yet many nurses, allied health professionals and hospital staff never use it, or use it without understanding the caps. If you work for a public hospital, a not-for-profit hospital or a public ambulance service, you may be able to pay everyday living expenses from pre-tax salary and save thousands a year in tax.
This guide explains salary packaging for healthcare workers in Australia for 2025–26: who qualifies, how much you can package, what the FBT caps mean in real dollars, and whether it is worth it.
What Is Salary Packaging?
Salary packaging — also called salary sacrifice — is an arrangement where you receive part of your salary as a benefit instead of cash. Your employer pays for the benefit directly, and that amount is not counted as taxable income, so you pay less tax and Medicare levy and your take-home pay rises.
For most employees, packaging is limited by fringe benefits tax: employers pay FBT at 47% on benefits they provide, which wipes out the advantage. But the law exempts certain employers, and healthcare is one of the biggest groups that benefits — the FBT rate is 47% for the FBT year ending 31 March 2027.
Public hospitals, not-for-profit hospitals, public ambulance services, public benevolent institutions (PBIs) and health promotion charities are FBT-exempt employers and can provide benefits up to a set cap each FBT year without paying FBT. The FBT year runs from 1 April to 31 March, so your cap resets each 1 April, not 1 July.
Who Qualifies for the FBT Exemption?
Whether you can salary package depends entirely on your employer, not your job title. Nurses, doctors, physiotherapists, radiographers, paramedics and administrative workers can all qualify if the employer is on the exempt list. A nurse doing the same work for a for-profit private hospital cannot access the exemption.
The FBT-exempt employers are public hospitals, not-for-profit hospitals, public ambulance services, PBIs and health promotion charities. Private hospitals that operate for profit do not get the exemption. Some other charities are rebatable employers, with a 47% FBT rebate capped at $30,000 grossed-up rather than a full exemption. Ask your payroll team or packaging provider if you are unsure.
The FBT Caps Explained — What They Mean in Real Dollars
The caps are set on the grossed-up taxable value of the benefits per FBT year, not on the amount you actually spend — grossing-up expresses a benefit as the salary you would have needed to earn to buy it after tax. For benefits without GST credits, the Type 2 gross-up rate is 1.8868, reflecting the 47% FBT rate. That is why the $17,000 and $30,000 headline caps exceed the amount you can actually spend:
| Employer type | Grossed-up cap (per FBT year) | Approximate spending money |
|---|---|---|
| Public hospital, not-for-profit hospital, public ambulance service | $17,000 | About $9,010 of non-GST living expenses ($8,172 if GST items) |
| Public benevolent institution (PBI) or health promotion charity | $30,000 | About $15,900 |
| Meal entertainment and entertainment facility leasing | $5,000 (separate cap) | About $2,650 |
A nurse in a public hospital can therefore package roughly $9,010 of living expenses each FBT year, plus roughly $2,650 of meal entertainment; a PBI or health promotion charity worker can package roughly $15,900, plus the same $2,650.
What Can You Package?
Under the living-expenses cap, you can package rent or mortgage repayments, utility bills, groceries, school fees and loan repayments — rent or mortgage is usually the largest item and the easiest way to use the full cap.
Two rules matter. First, a novated car lease shares the same cap — it does not get its own. Lease payments count toward your $17,000 (or $30,000) grossed-up cap, leaving less room for rent, groceries and bills, so you cannot do both in full. Run the numbers with a novated lease calculator before deciding.
Second, super contributions sit outside the cap. Salary-sacrificed super has its own limit — the concessional contributions cap of $30,000 for 2025–26 — and the superannuation guarantee rate is 12% in 2025–26. You can package living expenses and sacrifice extra super on top. Model this with a salary sacrifice calculator.
Worked Example: A Nurse on $80,000
Take a nurse on $80,000 at a public hospital who packages the full $9,010. Under the 2025–26 rates (0% to $18,200, 16% to $45,000, 30% to $135,000), tax plus the 2% Medicare levy on $80,000 is about $16,388. After packaging, taxable income falls to $70,990 and the tax bill falls to about $13,505 — a saving of about $2,883 a year, or roughly $111 a fortnight.
The saving comes from the marginal rate: every packaged dollar escapes tax at 30% plus the 2% Medicare levy, so 32 cents is saved per dollar ($9,010 × 32% ≈ $2,883). On $100,000, packaging the full $9,010 saves the same amount, because the packaged dollars still sit in the same 30% bracket. Adding the full $2,650 meal entertainment cap saves about another $848 (32% of $2,650), for a combined saving of about $3,731 a year before provider fees. Check your own figures with an income tax calculator.
Example Savings at Different Salaries
The saving is the same wherever the packaged dollars sit in the 30% bracket: at $60,000, $80,000, $100,000 and $120,000 the marginal rate is 30%, so the saving is $2,883. It only shrinks where packaging pulls income into the 16% bracket, for example below $45,000.
| Annual salary | Amount packaged | Approximate annual tax saving |
|---|---|---|
| $60,000 | $9,010 | About $2,883 |
| $80,000 | $9,010 | About $2,883 |
| $100,000 | $9,010 | About $2,883 |
| $120,000 | $9,010 | About $2,883 |
The Meal Entertainment Cap
Exempt employers can also provide up to $5,000 grossed-up — about $2,650 — for meal entertainment and entertainment facility leasing each FBT year. This separate cap does not reduce your living-expenses cap, and most healthcare workers use it for dining out, café meals and holiday accommodation.
| Covered by the meal entertainment cap | Not covered |
|---|---|
| Restaurant meals | Groceries |
| Café meals | Alcohol bought for home |
| Holiday accommodation | Everyday takeaway groceries |
| Venue hire for a function | Ordinary home food shopping |
Groceries belong under the living-expenses cap, and alcohol for home does not qualify. Keep receipts — your provider needs evidence the spending fits the category.
Reportable Fringe Benefits — The Catch to Know About
Salary packaging saves income tax, but it is not invisible to the rest of the tax and benefits system. If the taxable value of your fringe benefits exceeds $2,000 in an FBT year, the grossed-up amount appears on your income statement as a reportable fringe benefit. That figure counts toward your repayment income for HECS/HELP, which can increase your student loan repayment, and toward the Medicare levy surcharge threshold, the private health insurance rebate test and some family payment income tests.
Provider Fees and Whether It Is Worth It
Most employers use a packaging provider, which charges administration fees — often a few hundred dollars a year, sometimes per transaction. On $80,000, a saving of about $2,883 leaves plenty of room after fees; on a lower salary, where more of the packaged amount falls in the 16% bracket, fees take a bigger proportional bite.
Near the $18,200 tax-free threshold you save little or nothing, because the packaged income was not going to be taxed — yet fees still apply. Ask your provider for the full fee schedule and compare it with your expected saving; on a small amount, fees may outweigh the benefit entirely.
Changing Employers Mid-Year
The FBT cap is per employer, per FBT year. Changing employers gives you a fresh cap, but unused cap cannot be carried across, and you must track what you used with each employer. Moving to a for-profit private hospital ends the exemption from your start date, and using the full cap with two employers in one FBT year raises your combined reportable fringe benefits amount — so keep records for both.
Frequently Asked Questions
Who qualifies for salary packaging as a healthcare worker?
You qualify if your employer is FBT-exempt: a public hospital, a not-for-profit hospital, a public ambulance service, a public benevolent institution or a health promotion charity. Your job title does not decide it — your employer’s status does. For-profit private hospital workers do not get the exemption; other charities may be rebatable employers with a 47% FBT rebate capped at $30,000 grossed-up, not a full exemption.
How much can I salary package?
For a public or not-for-profit hospital or ambulance service, the cap is $17,000 grossed-up per FBT year — about $9,010 of non-GST living expenses (about $8,172 for GST items). For a PBI or health promotion charity, it is $30,000 grossed-up, or about $15,900. On top of either cap is a separate $5,000 grossed-up meal entertainment cap, worth about $2,650.
Does a novated lease use the same cap?
Yes. A novated car lease shares the same living-expenses cap — it does not get its own cap. Lease payments count toward your $17,000 (or $30,000) grossed-up cap, leaving less room for rent, groceries, bills and school fees. You cannot do both in full, so compare the options with a novated lease calculator first.
Does salary packaging affect my HECS repayment?
Yes, it can. If the taxable value of your fringe benefits exceeds $2,000 in an FBT year, the grossed-up amount appears on your income statement as a reportable fringe benefit, and it counts toward your repayment income for HECS/HELP, which can increase your student loan repayment. It also counts toward the Medicare levy surcharge threshold, the private health insurance rebate income test and some family payment income tests.
What happens if I change employers mid-year?
The cap is per employer per FBT year, so a new employer means a fresh cap — but unused cap cannot be carried across, and you must track what you used with each employer. Moving to a for-profit private hospital ends the exemption from your start date. Using the full cap with two employers in one FBT year raises your combined reportable fringe benefits amount, so keep records for both.
Is salary packaging worth it on a low salary?
Often not as much as people expect. The saving is the tax you would otherwise have paid on the packaged dollars, so near the $18,200 tax-free threshold there is little or no tax to save — yet provider fees, often a few hundred dollars a year, still apply. The saving is strongest in the 30% marginal tax bracket, so compare your expected saving against the full fee schedule first. The national minimum wage is $26.44 an hour from 1 July 2026, so a full-time minimum-wage worker gains little from packaging.
Conclusion
Salary packaging is a genuine, valuable benefit for healthcare workers at public hospitals, not-for-profit hospitals, ambulance services, PBIs and health promotion charities. A nurse on $80,000 who packages the full $9,010 can save about $2,883 a year — roughly $111 a fortnight — and adding the full meal entertainment cap can lift the combined saving to about $3,731 a year before fees. For PBI and health promotion charity workers, the higher $30,000 cap means an even larger opportunity.
But it is not automatic. Confirm your employer is genuinely exempt, remember the caps are grossed-up figures rather than spending amounts, that a novated lease shares your cap, and that reportable fringe benefits can affect HECS repayments and other income tests. Weigh fees against your expected saving, especially on a lower salary. If the numbers work, set it up early in the FBT year and review it each April when the cap resets. Check your saving with an income tax calculator or a salary sacrifice calculator.