Understanding EML Salary Packaging: How It Affects Your Take-Home Pay

How EML Salary Packaging Works

EML salary packaging (often called salary sacrifice) lets you swap part of your pre-tax salary for benefits your employer provides. The Australian Taxation Office explains that this reduces your taxable income, so you pay less income tax and Medicare levy. For example, if your annual remuneration is $65,000 and you sacrifice $17,353 for a car, your taxable income drops to $47,647, saving you over $5,000 in tax and Medicare compared to no packaging.

The Impact on Your Take-Home Pay

Your take-home pay after tax and Medicare depends on your packaging choices. The ATO’s example shows that with employee contributions, net disposable income can actually increase. However, you must arrange the package before you earn the income. notes that salary packaging is only worthwhile if the benefits and tax savings outweigh any FBT costs.

Comparing with Benchmarks

To see where you stand, compare your packaged salary with the national minimum wage ($26.44 per hour, $1,004.90 per week) and full-time ordinary time earnings ($2,083.70 per week, $108,352 annually). If your packaged salary is below these, you may still benefit from reduced tax, but check your net disposable income carefully.

Tax and Medicare Considerations

For 2026–27, the tax rates start at nil for the first $18,200, then 15c per dollar up to $45,000, and 30c per dollar up to $135,000. The Medicare levy is 2% of taxable income, with reduced rates for low incomes (single thresholds $28,011 and $35,013). Salary packaging can help you stay in a lower bracket, but remember that FBT may apply to benefits like cars or electronics.

Super and Salary Packaging

Salary sacrificed super contributions are a popular option. They are taxed at 15% in your fund and count toward the concessional cap. Your employer must still pay the super guarantee on your original salary. This can boost your retirement savings while reducing your current tax.

Key Steps Before You Start

• Agree on the arrangement before you perform the work.
• Ensure you cannot access the sacrificed salary.
• Check if your employer offers packaging and what benefits are available.
• Consider how it affects government benefits, child support, or study loans.

For more details, see our Salary packaging guide and Tax and Medicare page. You can also use the Take-home pay calculator to estimate your net income.