If you’re an employer in the not-for-profit or community services sector and registered as a Public Benevolent Institution (PBI), you have a powerful tool to attract and reward your workforce: salary sacrificed benefits. 

What is a PBI salary sacrifice arrangement?

A PBI salary sacrifice arrangement (also known as a salary packaging arrangement) allows employees to use part of their pre-tax income to pay for everyday expenses, reducing their taxable income and increasing take-home pay. As a PBI employer, you can offer an employee the ability to salary sacrifice benefits with a grossed-up value of up to $30,000 per fringe benefits tax (FBT) year in tax-free benefits for general living expenses such as rent, mortgage repayments, credit card bills and utilities.  A grossed-up amount of $30,000 typically enables an amount of $15,900 to be provided. 

Additionally, employees may access $2,650 annually for meal entertainment and venue hire expenses, making this a highly attractive incentive. 

Why offer salary sacrifice?

Offering salary sacrifice arrangements as a result of your PBI status can: 

• Enhance employee remuneration without increasing your payroll costs 

• Improve staff retention and satisfaction 

• Attract skilled professionals in a competitive job market 

• Demonstrate your commitment to employee wellbeing 

These benefits are especially valuable in sectors like aged care, disability services and community health.

How does it work?

As the employer, you either partner with a salary packaging provider or manage the arrangement internally. Employees nominate a portion of their salary to be directed toward approved expenses. This amount is deducted before tax, resulting in a higher net income. 

You’ll need to ensure:

• Your organisation is endorsed by the ATO as a PBI 

• Salary packaging agreements are in place before income is earned 

• Payments are made to third parties (not directly to employees), unless the payment to an employee is properly structured as a reimbursement of an expense already paid 

Key considerations:

• The FBT exemption cap for PBIs is a $30,000 grossed-up value per employee per FBT year 

• Salary packaging may affect employees’ eligibility for government benefits or liability for HECS/HELP repayments 

• Clear communication and compliance are essential
  

Ready to empower your team?

The Saward Dawson team are specialists at salary sacrifice arrangements and FBT implications for PBIs . Get in touch for specialist advice for your organisation.