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For employees in Australia’s not-for-profit (NFP) sector, salary packaging is one of the biggest perks available. It’s a way to legitimately reduce your taxable income and take home more of your pay — without your employer increasing your salary.
If you work for a charity, public benevolent institution (PBI), hospital, or community organisation, understanding how this works could make a meaningful difference to your finances.
Let’s break down what salary packaging means for NFPs, how it works, and how you can get started.
Salary packaging (sometimes called salary sacrificing) is an agreement between you and your employer to use part of your pre-tax income to pay for personal expenses like rent, mortgage, or car repayments.
Normally, these are things you’d pay from your after-tax salary. But when packaged, they come out before tax — reducing your taxable income and boosting your take-home pay.
For not-for-profit organisations, there’s an extra advantage: FBT exemptions and rebates.
The Australian Tax Office (ATO) allows many NFP employers to offer certain benefits completely tax-free up to set annual limits. These exemptions make salary packaging particularly valuable for charities and community-focused organisations.
Here’s how it works in practice:
You and your employer agree to package part of your salary.
That portion is used to cover eligible expenses instead of being paid to you as cash.
Because those payments are made before tax, your taxable income goes down — meaning you pay less tax and keep more of your pay.
For NFP employees, these packaged amounts are exempt from Fringe Benefits Tax (FBT) up to a limit. Once you reach your annual cap, any additional packaged amount may attract FBT, which can reduce your savings.
How much you can package depends on the type of organisation you work for:
Public Benevolent Institutions (PBIs) and Health Promotion Charities: up to $15,900 per year, tax-free
Public and Not-for-Profit Hospitals and Ambulance Services: up to $9,010 per year, tax-free
Other Not-for-Profit Organisations eligible for an FBT rebate: smaller caps, but still beneficial
This cap resets each Fringe Benefits Tax year (1 April to 31 March).
NFP employees can package a broad range of personal and living expenses, including:
Mortgage or rent payments
Car loans or lease payments
Credit card repayments
Meal entertainment and accommodation
Utility bills
Superannuation contributions
Many employees also choose to combine packaging with salary sacrificing to super, which can help build long-term retirement savings while maximising tax efficiency.
If you’d like to understand that strategy better, see our article on Salary Sacrificing to Super.
Let’s say James works for a registered charity (a PBI) and earns $100,000 per year.
He chooses to package:
$15,900 towards his mortgage
$2,650 for meal entertainment
Without salary packaging:
Taxable income: $100,000
Approx. tax payable: $22,967
Take-home pay: around $77,033
With salary packaging:
Taxable income: $81,450
Approx. tax payable: $17,367
Take-home pay: around $82,633
That’s an extra $5,600 per year back in James’s pocket — simply by using the NFP salary packaging rules.
Most private sector employees can only package limited benefits like super contributions or novated leases. But NFPs have an additional tax advantage because of the Fringe Benefits Tax exemption caps.
This allows organisations in the community sector to offer employees a genuine, legal financial benefit — one that increases job satisfaction and retention without increasing payroll costs.
It’s a win-win:
Employees keep more of what they earn.
Employers attract and retain skilled staff at a lower overall cost.
If you’re unsure which benefits apply to your specific organisation, it’s best to get tailored advice — as eligibility and limits can vary.
A few myths often cause confusion:
“It’s only for senior staff.”
False. Most full-time and part-time NFP employees can access packaging if their employer offers it.
“It reduces my super or leave.”
It can, depending on how your employer calculates entitlements. Always confirm before setting up your package.
“It’s the same everywhere.”
Each organisation’s FBT status determines its cap, so the limits aren’t universal.
Understanding these details upfront ensures you maximise your benefit and stay compliant.
Salary packaging for not-for-profit organisations is one of the most generous tax benefits available in Australia — but only if structured correctly.
Rules can differ between organisation types, and not all expenses qualify. Getting expert guidance ensures you stay within ATO limits and truly maximise your take-home pay.
Want to find out how much you could save through salary packaging?
Contact KSH TAX, Perth’s trusted accounting and tax agents, for a personal salary packaging review tailored to your organisation and income.
FBT, Benefits & Implications of Salary Sacrifice for Employers and Employees
36/328 Albany Hwy, Victoria Park, WA 6100
08 6285 8120
Mon-Fri: 9:00AM-9:00PM
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