You’ve probably heard the terms salary packaging and salary sacrifice used in conversations about pay and benefits. While they are often used to mean the same thing, there are a few key differences worth understanding.
Whether you’re looking to stretch your income further or offer more value to your team, this guide breaks down salary packaging vs salary sacrifice in simple terms. You’ll also learn how tools like SalaryMax make it easy to manage both with less admin and more control.
What is Salary Packaging?
Salary packaging is when an employee agrees to receive part of their salary as benefits instead of cash. These benefits are paid for using pre-tax income, which reduces how much tax the employee pays and can increase their take-home pay.
It’s a common and ATO-approved arrangement, especially popular in sectors like healthcare, education, government, and not-for-profits. Salary packaging can be used for things like groceries, utility bills, meals, and other everyday expenses.
You can learn more on our Salary Packaging Explained & Benefits page.
What is Salary Sacrifice?
Salary sacrifice is a broader term. It refers to any agreement where an employee gives up part of their salary in exchange for a non-cash benefit. This could be extra superannuation, a novated lease, or work-related items like laptops. Salary packaging is actually one type of salary sacrifice. The two terms are often used interchangeably, but salary sacrifice can apply more broadly across different benefit types and industries. You can read more on our Salary Sacrifice Explained page.Salary Packaging vs Salary Sacrifice: key differences and similarities
To help clear things up, here’s a quick comparison:|
Feature |
Salary Packaging |
Salary Sacrifice |
|
What it means |
Pre-tax salary used to pay for selected benefits |
Giving up salary in exchange for non-cash benefits |
|
Common uses |
Meals, groceries, utility bills, living costs |
Superannuation, cars, laptops |
|
ATO involvement |
Covered by Fringe Benefits Tax rules |
May involve FBT depending on the benefit |
|
Are they the same? |
A type of salary sacrifice |
Broader category that includes salary packaging |
Why use a Salary Packaging Card?
Salary packaging doesn’t need to involve paperwork or receipts. With a salary packaging card, you can load pre-tax funds onto a prepaid card that employees use to pay for eligible items.
The SalaryMax Prepaid Card helps make salary packaging easy to manage and compliant with ATO rules. It includes:
- Preloaded funds ready to use at approved merchants, instore or online
- Digital or plastic card options
- Built-in merchant restrictions to control spending, reducing admin
- Same-day delivery for digital cards
- Easily reloaded via our Client Portal to support your payroll cycle
Visit the SalaryMax page to learn more.
Who can benefit from Salary Packaging?
Salary packaging is especially helpful for people working in sectors that have tax concessions. These include:
- Public benevolent institutions and charities
- Religious organisations and not-for-profits
- Public hospitals and aged care providers
- Unions, schools, and universities
Small to medium-sized businesses can especially benefit from a solution like SalaryMax to deliver compliant and easy-to-manage salary packaging solutions.
If you’re in the not-for-profit sector, click here to view further information on Not-for-Profit Salary Packaging.
Benefits of Salary Packaging for employers and employees
For employers:
- Offer competitive benefits without raising salaries
- Improve staff satisfaction and retention
- Reduce payroll tax and manage FBT more efficiently
- Save time with automated tracking and reporting
- Strengthen your brand with custom-branded cards
For employees:
- Reduce income tax and take home more each pay
- Use pre-tax dollars on everyday living expenses
- No need to submit claims or receipts
- Access prepaid cards that are easy to use
- Enjoy improved financial wellbeing
SalaryMax gives you a secure, easymodern and practical way to roll out salary packaging across your team. You can even pair it with other benefits like employee rewards or Prepaid Fuel Cards to build a well-rounded program.
Want to make salary packaging simpler and more impactful?
Let’s build a solution that works for your people and your business.
