For many people working in the not-for-profit sector, salary packaging can be an appealing part of their employment package.
You may have heard of the $15,900 cap or wondered whether your organisation offers salary packaging benefits. While the terminology can seem complicated, the basics are often much simpler than they first appear.
This guide explains what PBI salary packaging is, which employers may offer it, how the $15,900 cap works and some of the common questions people have about eligibility and packaging arrangements.
This article provides general information only and should not be considered financial, taxation or personal advice.
What is PBI salary packaging?
A common question is, what is PBI salary packaging?
PBI stands for Public Benevolent Institution. These are organisations that provide support and services to people in need and hold a specific status recognised by the Australian Taxation Office.
PBI salary packaging is a type of salary packaging arrangement available to employees of eligible organisations. It allows certain personal living expenses to be included as part of a salary packaging arrangement.
If you are new to the concept, our guide on what is salary sacrifice explains the broader principles behind salary packaging and how these arrangements generally work.
PBI salary packaging differs from standard arrangements because eligible employees may have access to additional packaging opportunities that are specific to certain employer types.
What types of employers qualify for PBI salary packaging?
Not every not-for-profit organisation can offer PBI salary packaging.
Eligibility depends on the employer’s status and whether they are recognised as a:
- Public Benevolent Institution (PBI)
- Health Promotion Charity (HPC)
- Eligible public hospital
- Eligible ambulance service
This is where some confusion often arises. Working for a charity or not-for-profit organisation does not automatically mean you can access PBI salary packaging.
If you are unsure about your employer’s eligibility, our guide to not for profit salary packaging provides a broader overview of how salary packaging works across different not-for-profit organisations.
What is the $15,900 salary packaging cap?
Another question people often ask is, what is the $15,900 salary packaging cap?
Eligible employees of Public Benevolent Institutions and Health Promotion Charities may be able to package up to $15,900 each Fringe Benefits Tax year for certain living expenses.
This cap applies specifically to general living expenses and sits separately from other benefits that may be available under an employer’s salary packaging program.
The $15,900 amount is not an additional payment from your employer. Rather, it represents the maximum amount that may be packaged under an eligible arrangement during the FBT year.
Depending on their employer’s arrangements, eligible employees may also have access to meal entertainment benefits in addition to their living expenses packaging.
What does the employer share mean in salary packaging?
You may also come across the term what is employer share in salary packaging.
In simple terms, the employer share refers to the employer’s involvement in facilitating the salary packaging arrangement.
Salary packaging is an agreement between an employee and employer where part of an employee’s remuneration is structured to include approved benefits or expenses.
The employer’s role is generally administrative and often involves working with a specialist provider to manage the arrangement.
The employer share does not usually mean the employer is contributing additional money. Instead, it refers to how the arrangement forms part of an employee’s overall remuneration package.
What does 100% salary packaging mean?
Generally, it refers to directing as much eligible income as possible through a salary packaging arrangement.
In practice, there are limits and requirements that apply, which means employees cannot package unlimited amounts.
For most people, the focus is simply on making use of the salary packaging opportunities available through their employer rather than packaging their entire salary.
What expenses can be packaged under the $15,900 cap?
Living expenses cover many of the everyday costs people already have. For eligible employees, salary packaging can provide another way to manage these regular household expenses through their employer’s program.
Depending on the arrangement, eligible living expenses may include:
- Mortgage repayments
- Rent
- Credit card payments
- Personal loan repayments
- Utility bills
- Groceries
- Fuel
- Clothing
- General household purchases
Once enrolled, employees can use their packaged funds towards eligible expenses in line with their employer’s program. You can learn more about how salary packaging for living expenses works and the types of expenses that may be supported.
The expenses available can vary depending on the employer and the salary packaging arrangement in place. Employees should check the details of their program before getting started.
Note: This information is general and not intended as tax or financial advice. Please consult a financial adviser or refer to the ATO for specific eligibility details.
How salary packaging can affect your pay
One reason employees are interested in salary packaging is because it can change how their remuneration is structured.
For example, an eligible employee may choose to package certain living expenses under the available cap rather than paying for those expenses in the usual way.
The outcome will differ depending on individual circumstances and the arrangements offered by the employer.
Employees wanting to better understand how these arrangements work can learn more about salary sacrificing with SalaryMax and the options available through their organisation.
Common misconceptions about PBI salary packaging
There are a few common misunderstandings around PBI salary packaging.
All not-for-profit employees can access it
Not necessarily. Eligibility depends on the employer’s approved status.
Everyone receives the same outcome
Salary packaging arrangements can vary depending on the employer, the provider, and individual circumstances.
Salary packaging is complicated
The rules can seem technical at first, but many employers work with specialist providers who guide employees through the process and explain the available options.
How to access PBI salary packaging
If you think you may be eligible, getting started is usually straightforward.
It often involves:
- Confirming that your employer offers PBI salary packaging.
- Speaking with your employer or salary packaging provider.
- Choosing the salary packaging options available to you, such as living expenses and, if offered, meal entertainment.
- Completing the required enrolment process.
Once enrolled in a living expenses arrangement, employees can use their packaged funds towards eligible purchases and payments in line with their employer’s program.
Corporate Prepaid Cards supports Australian organisations with SalaryMax, a salary packaging solution designed to make living expenses and meal entertainment benefits easier to manage. SalaryMax gives employees a straightforward way to access available benefits. It also gives employers a practical way to introduce and administer salary packaging across their organisation.
This can be particularly useful for eligible organisations that do not currently have a salary packaging provider or are looking for a simpler way to manage an existing program.
Understanding your options
PBI salary packaging can be an attractive benefit for eligible employees, but access depends on your employer’s status and the arrangements they have in place.
Understanding what PBI salary packaging is, what the $15,900 salary packaging cap means and how employer eligibility works can make it easier to understand the opportunities that may be available through your workplace.
If you think you may be eligible, start by speaking with your employer or salary packaging provider. They can confirm the program available through your organisation and explain how to get started.
If your organisation is eligible but does not currently work with a salary packaging provider, or manages salary packaging through payroll, SalaryMax can provide a simpler way to manage the program. It supports employers with the administration of salary packaging while giving employees a straightforward way to access available benefits such as living expenses and meal entertainment.
To learn more about introducing SalaryMax at your organisation, contact our Australia-based team on 1300 181 032 or email [email protected].
Frequently Asked Questions
PBI salary packaging is an arrangement available through eligible Public Benevolent Institutions and certain other organisations. Depending on the employer’s program, employees may be able to access benefits such as living expenses and meal entertainment. SalaryMax gives eligible organisations a practical way to make these benefits available to their employees.
Employees of eligible Public Benevolent Institutions and Health Promotion Charities may have access to the $15,900 living expenses cap. Eligibility depends on the employer and the salary packaging arrangements they offer.
Eligible PBI employees may have access to salary packaging benefits that are not available through standard employer arrangements. These can include living expenses and, where offered, meal entertainment. Your employer or salary packaging provider can explain which options are available through your workplace.
Depending on your employer’s arrangement, living expenses can include costs such as mortgage or rent payments, utilities, groceries, fuel, credit card payments and other eligible everyday purchases. SalaryMax can provide eligible employees with a convenient way to access and use their living expenses benefit.
It generally refers to directing as much eligible income as possible through salary packaging arrangements. Limits and eligibility requirements still apply, so the options available will depend on the employee and their employer’s program.
Your employer or HR team can confirm whether your organisation has the appropriate status and offers PBI salary packaging. If your organisation is eligible but does not currently have a salary packaging solution in place, Corporate Prepaid Cards can support the implementation and management of a program through SalaryMax.
