Nurse salary packaging and tax explained

How salary packaging works for hospital and health nurses

Salary packaging means you agree with your employer to take less pay before tax, and in return your employer pays for certain benefits of similar value, so the packaged part of your pay is not taxed as salary. For nurses employed by a public or not-for-profit hospital or a public ambulance service, those benefits are exempt from fringe benefits tax (FBT) up to a yearly cap, which is why packaging is common in public health.

In practice a packaging provider usually runs the arrangement. Part of each pay goes to the provider before tax, and the provider uses it to pay approved expenses for you, such as rent, mortgage or loan repayments, or other bills. Your take-home pay is lower, but so is your taxable income.

The ATO says an effective arrangement must be entered before you do the work, must be agreed between you and your employer, and you must not have access to the sacrificed salary. You can't package pay you have already earned, such as accrued leave or a bonus you are already entitled to. Expenses paid by ordinary direct debit from your pay are not salary sacrificed.

The FBT exemption caps

The ATO sets capping thresholds for FBT-exempt employers. Benefits are exempt from FBT while their total grossed-up value for the FBT year stays at or below the cap. The FBT year runs from 1 April to 31 March, not 1 July to 30 June.

The cap is a grossed-up value, not the amount of pay you package. Grossing up converts a benefit into the pre-tax salary you would have needed to earn to buy it yourself. The cash amount you can package is therefore well below the headline cap. Your packaging provider will tell you your actual limit.

• Public and not-for-profit hospitals and public ambulance services: a cap of $17,000 per employee.
• Public benevolent institutions and health promotion charities, which can include some not-for-profit aged care and community health employers: a cap of $30,000 per employee.
• If an employer is both a public benevolent institution and a public or not-for-profit hospital, the hospital cap applies.

The separate meal entertainment and venue hire cap

Hospital and other FBT-exempt employers can also offer salary packaged meal entertainment and entertainment facility leasing, which providers often market as venue hire. The ATO says this is exempt only if the grossed-up value of these benefits in the salary packaging arrangement is $5,000 or less for the FBT year.

This is a separate cap from the general $17,000 or $30,000 cap. Meal entertainment has its own rules about what qualifies, so check with your packaging provider before you spend and keep the receipts they ask for.

Your reportable fringe benefits amount

If the total taxable value of your fringe benefits is more than $2,000 in an FBT year, your employer reports it to the ATO. The grossed-up figure is your reportable fringe benefits amount, and it appears on your income statement in myGov.

Packaged benefits are still reportable even though they are exempt from FBT. The ATO explains that a public hospital must report a benefit that is exempt only because the hospital is an exempt employer. That is why a packaging nurse usually sees a reportable fringe benefits amount even though no FBT was paid.

You are not taxed on this amount and it does not increase your income tax. If you lodge through a tax agent or myTax, it normally comes across from your income statement, so you usually just need to check it matches your packaging statement.

What the reportable amount does affect

The reportable fringe benefits amount is added back in several income tests. This is where salary packaging can catch nurses out at tax time.

• Medicare levy surcharge: it counts when working out whether you pay the surcharge if you don't have appropriate private hospital cover.
• Private health insurance rebate: it counts when working out your rebate entitlement.
• HELP and other study loans: it is added to your taxable income to work out your repayment income, so your compulsory repayment can be higher than your taxable income alone suggests.
• Some government payments and obligations: including family assistance payments and child support. For employees of hospitals and other FBT-exempt employers, the ATO says 53% of the amount is used for family assistance and youth income support payments, and the full amount for other payments.
• Super-related tests: including the government co-contribution and Division 293 tax.

• Nurse tax deductions 2025–26: the full guide
• Graduate nurse tax checklist (HELP debts and first returns)

Novated leases and packaged items: no double claims

The ATO is clear that you can't claim a tax deduction for an expense your employer pays as part of your salary package. If your professional membership, a laptop or another work item was packaged, you can't claim it again as a work-related deduction.

With a novated lease, the ATO treats the car as one you don't own, lease or hire yourself, so you can't claim car expenses for it, including fuel, servicing, insurance or decline in value. You can still claim work-related parking fees and tolls you pay yourself on genuine work trips, such as driving between two hospitals during a shift.

Work-related items such as a portable electronic device or protective clothing can currently be packaged without FBT. The ATO has announced that from 1 April 2027, work-related items provided through a salary sacrifice arrangement will no longer be exempt, so check with your provider before you package one.

• Can nurses claim parking on tax?

Changing employers mid-year

Nurses often move between health services, or go from a public hospital to private or agency work. A few things to know:

• Each eligible employer applies the cap to the benefits it provides. The ATO notes the cap is not reduced just because you worked there for only part of the FBT year.
• If money left in your packaging account is cashed out instead of used for a benefit, it becomes salary and is taxed as normal income.
• Because the FBT year ends on 31 March, benefits you receive between 1 April and 30 June are generally reported on the following year's income statement.
• Each employer issues its own income statement. Check that every one is marked tax ready and that any reportable fringe benefits amount appears only once.

Records to keep

Salary packaging needs fewer receipts than deductions, but the paperwork still matters when you check your return. Keep these for five years from when you lodge.

• Your salary packaging agreement and any changes to it.
• Annual or FBT-year statements from your packaging provider, showing what was packaged and the grossed-up amount.
• Payslips showing the pre-tax packaging deductions.
• Your income statement from each employer, showing the reportable fringe benefits amount.
• Meal entertainment and venue hire receipts your provider requires.
• Novated lease statements, plus parking and toll receipts for any work trips you claim.

Common mistakes, and why this is an appointment topic

The most common mistakes are claiming a packaged item again as a deduction, claiming fuel or servicing on a novated lease car, and being surprised by a higher HELP repayment or a Medicare levy surcharge because of the reportable amount. Some nurses also assume packaging changes what they can claim for work expenses. It doesn't. The usual rules still apply: you spent the money, weren't reimbursed, the expense relates directly to earning your income and you have a record.

The ATO does not give advice on whether to enter or leave a salary sacrifice arrangement, and the right answer depends on your HELP debt, private health cover, family payments and other income. If you are packaging, changing employers or thinking about a novated lease, it is worth reviewing the whole picture with a registered tax agent before you lodge.

Common questions

Why is my reportable fringe benefits amount bigger than what I packaged?

The amount is grossed up to show the pre-tax salary you would have needed to earn to buy the benefits yourself, so it is higher than the dollars that left your pay. It is used in income tests but is not taxed.

Do I need to enter my reportable fringe benefits in myTax?

Usually no. It normally comes across from your income statement once your employer marks it tax ready. Check the figure against your packaging statement before you lodge.

Does salary packaging reduce my super guarantee?

The ATO says your employer must still pay your full super guarantee as if there were no salary sacrifice arrangement. Packaging extra pay into super is a different arrangement from packaging living expenses.

Can I claim my AHPRA fee if I paid it through salary packaging?

No. If your employer paid an expense as part of your salary package, you can't claim a deduction for it. You can only claim work expenses you paid yourself from after-tax pay and that weren't reimbursed.