Understanding Your Take-Home Pay: Salary Sacrifice Mortgage and Other Packaging Options

Gross Salary, Package, and Take-Home: What Reaches Your Bank Account?

When you see a job ad offering $100,000, that figure is usually the gross salary – the amount before tax, Medicare levy, and any salary sacrifice deductions. But what you actually receive in your bank account is your take-home pay, which can be very different if you use salary packaging. One common but often misunderstood option is a salary sacrifice mortgage, where your employer pays your home loan directly from your pre-tax income.

The Three Numbers You Need to Know

• Gross salary: The annual figure in your contract. For example, the national minimum wage is $26.44 an hour or $1,004.90 a week, which works out to $52,255 a year (based on 38 hours a week, 52 weeks).
• Package: Your gross salary plus any benefits you sacrifice. The total value of your remuneration stays the same, but the mix changes.
• Take-home pay: What lands in your account after income tax, Medicare levy, and any employee contributions you make for sacrificed benefits.

How Salary Sacrifice Works

Under a salary sacrifice arrangement, you and your employer agree that you will receive less salary in exchange for a benefit of similar value. The Australian Taxation Office explains that this reduces your taxable income, meaning you pay less tax. The benefit can be almost anything – a car, super contributions, or even a salary sacrifice mortgage – as long as it forms part of your remuneration.

Crucially, the benefit is not tax-free. Your employer reports the fringe benefit on your income statement using a grossed-up value (multiplied by 1.8868 for most benefits). This reportable amount can affect your eligibility for certain tax offsets, the Medicare levy surcharge, and government benefits like Family Tax Benefit.

Example: $65,000 Salary with a Car (from the ATO)

The ATO provides a clear comparison for the 2025–26 year. Without any packaging, your take-home pay on $65,000 would be:

• Taxable income: $65,000
• Income tax (2025–26 rates): $10,288
• Medicare levy (2%): $1,300
• After-tax income: $53,412
• Less car expenses you pay yourself: $11,500
• Net disposable income: $41,912

Now, if you salary sacrifice a car worth $7,000 (taxable value) without making an employee contribution:

• Salary sacrifice amount: $17,353
• Taxable income: $47,647
• Income tax: $5,082.10
• Medicare levy: $952.94
• After-tax income: $41,611.96
• No car expenses (employer pays)
• Net disposable income: $41,611.96 – slightly less than without packaging.

But if you make an employee contribution of $7,000 (so you pay the employer back part of the cost):

• Salary sacrifice amount: $4,145
• Taxable income: $60,855
• Income tax: $9,044.50
• Medicare levy: $1,217.10
• After-tax income: $50,593.40
• Less employee contribution: $7,000
• Net disposable income: $43,593.40 – a gain of $1,681.40 compared to no packaging.

How a Salary Sacrifice Mortgage Fits In

A salary sacrifice mortgage works the same way. You reduce your salary by an agreed amount, and your employer pays that amount directly to your lender. Your taxable income drops, so the tax and Medicare levy taken from your pay are lower. However, the mortgage payment is a fringe benefit, and its grossed-up value appears on your income statement. This may push you into a higher bracket for the Medicare levy surcharge if you don't have private hospital cover.

Tax Rates for 2026–27

For the current tax year, the resident tax rates are:

• $0 – $18,200: Nil
• $18,201 – $45,000: 15c for each $1 over $18,200
• $45,001 – $135,000: $4,020 plus 30c for each $1 over $45,000
• $135,001 – $190,000: $31,020 plus 37c for each $1 over $135,000
• $190,001 and over: $51,370 plus 45c for each $1 over $190,000

These rates exclude the Medicare levy. The Medicare levy is 2% of your taxable income for most people. The single-person thresholds are $28,011 and $35,013 – if your taxable income is below $28,011 you pay no levy; between $28,011 and $35,013 you pay a reduced rate.

The Low Income Tax Offset (LITO)

You may also be eligible for the Low Income Tax Offset. For 2026–27, the maximum $700 at taxable income up to $37,500, then reduces by 5c per $1 until $45,000, then $325 minus 1.5c per $1 over $45,000 until $66,667. It can only reduce your tax to zero.

What About Super?

Salary sacrificed super contributions are treated as employer contributions. Your employer must still pay the super guarantee (12% from 1 July 2026) on your original salary, not the sacrificed amount. Super is not deducted from your take-home pay – it's an additional contribution.

Key Takeaways

• Your take-home pay depends on your gross salary, salary sacrifice amount, tax bracket, and Medicare levy.
• A salary sacrifice mortgage can boost your net disposable income if structured with employee contributions.
• Always check the impact on the Medicare levy surcharge and government benefits.
• Use the Take-home pay calculator to estimate your after-tax income.
• For more on packaging rules, see Salary packaging.