When considering a not-for-profit organisation as a workplace you might feel conflicted between aligning with a greater cause and earning a higher salary in a for-profit organisation. Money isn’t everything, however, you don’t necessarily need to sacrifice the value of it for fulfilment in your work. Many not-for-profits (NFPs) offer generous benefits that workers in the private sector might not receive. Job sharing, opportunities to work from home, generous leave entitlements, flexible hours and tax-free salary packaging, are all the norm in the NFP sector. In this blog, we’ll explore salary packaging options you have as an employee of NFP organisations.
The important role of not-for-profit organisations
The Australian Government recognises that NFPs are vital in addressing social, environmental, and community needs across Australia. While these organisations focus primarily on their charitable missions, they must attract and retain skilled staff. An effective way to do so without cash flow pressures is by offering attractive employee benefits such as salary packaging. The Government allows all NFPs a Fringe Benefits Tax (FBT) Status where they’re not required to pay FBT for providing benefits to their employees. This makes salary packaging arrangements straightforward and at no expense to them.
How salary packaging works
The Australian Taxation Office (ATO) allows you to use some of your salary to pay for different ‘non-cash’ benefits rather than taking all your salary as cash. The principle is that by paying for some items from your gross salary rather than from your after-tax salary, you’ll reduce the amount of income tax you pay and make your salary go further.
An employer’s Fringe Benefits Tax (FBT) status allows the gross salary of their employees to have a tax-free component each FBT year (1 April to 31 March), in addition to their tax-free threshold. NFPs are exempt from paying FBT so there are no limitations to them offering their employees the option to package the maximum capped amount of $15,900 every year. If you use salary packaging as an employee, you’ll only pay tax on the remaining portion of your salary. This significantly reduces your taxable income which means you pay less tax.
The variety of packaging options NFPs offer
NFPs offer a variety of packaging options that align with their employees’ needs, such as living expenses, novated leases, meal and entertainment benefits, and even contributions to charitable causes. The below table outlines the different packaging options available to you when you work for an NFP. In addition to this table, depending on the organisation you work for and their salary packaging policy, you may also be eligible to salary package a Novated Lease and/or Exempt Benefits and/or Remote Area benefits.
NFP salary packaging options
| Expense CAP value | Typical benefits | Payment methods |
| $15,900.00
($611.53 over 26 pays) |
|
|
| $2,650.00
($101.92 over 26 pays) |
|
|
Salary Packaging in Not-for-Profit organisations
Exploring salary packaging options within NFP organisations offers a unique perspective on how you can strike a balance between professional fulfilment and financial rewards. The decision to work for an NFP shouldn’t be seen as an either-or scenario between personal values and financial considerations. Salary packaging options in NFP organisations bring together purpose and benefits. NFPs in Australia can offer compelling perks and tax-free packaging. The Fringe Benefits Tax exemption empowers NFPs to provide up to $15,900 annually in packaging benefits, reducing the taxable income of employees. If you work for an NFP or are considering a career move into an NFP organisation be sure to ask about salary packaging options.
Get started with salary packaging
If you’d like to learn more about salary packaging options in NFPs, CBB The Salary Packaging People have finance expertise to guide you. We’re independent specialists in NFP salary packaging. Contact us today or call 03 5229 4200 and unlock the full potential of your income.