Taxable income, Take-home pay and Adjusted Taxable Income (ATI)
Taxable income is your gross income and generally includes wages, salaries, bonuses, interest, dividends, rental income, and other earnings, minus allowable deductions and exemptions (like work-related expenses, superannuation contributions, or tax-free thresholds).
Your take-home pay is what you receive in your bank account after income tax, Medicare levy, other withholdings (like HECS/HELP) and any Salary Packaging deductions.
The Adjusted Taxable Income (ATI) is different from your taxable income and may include other sources of income. The ATI is used by the Australian Taxation Office (ATO), Centrelink and other government agencies to assess certain payments and benefits. The ATI includes your taxable income, reportable fringe benefit amount (RFBA) and other items such as investment losses, reportable super contributions etc.
For more information about the Adjusted Taxable Income, please visit: What adjusted taxable income is – Child support assessment – Services Australia
What is a Reportable Fringe Benefit Amount (RFBA)
When you salary package, certain benefits may be subject to being reported on your income statement as a Reportable Fringe Benefit Amount (RFBA). When the salary packaged amount exceeds a taxable value of $2,000.00 during the FBT year, the grossed-up salary packaged amount is reported to the ATO and appears on your income statement as RFBA.
The ATO uses the formula: packaged amount x 1.8868 (Type 2 Gross-Up Rate) = RFBA.
Some benefits are excluded from RFBA reporting, these benefits are known as exempt benefits or otherwise deductibles. Examples of these benefits are the mobile phone benefit, the laptop benefit, self-education, airport lounge, investment property interest benefit etc.
Capped benefits generate a RFBA for benefits such as Mortgage, Rent, Living Expenses and Meal Entertainment.
Examples of capped benefits RFBA values:
*For employees of public/notforprofit hospitals or ambulance services.
**For employees of charities, PBIs (FBT exempt). And eligible NFP organisations in sectors such as education, religion and community services
(not fully FBT exempt).
Electric vehicles (EVs) that are FBT‑exempt generate an RFBA if the value exceeds $2,000. The RFBA for EV’s is calculated as follows:
FBT base value × 20% × 1.8868 (Type 2 Gross-Up Rate) = RFBA
Example of someone packaging the $15,900 FBT cap on a $70,000 salary (excluding superannuation) and no other income.
When salary packaging, your taxable income decreases and your repayment income increases. An RFBA does not affect the income tax you pay but can affect income-tested payments.
If you are unsure of your RFBA, you can contact us for an RFBA estimate for the upcoming FBT year.
HECS/HELP
HECS/HELP repayments are based on the repayment income. When Salary Packaging the taxable income goes down, while the reportable income goes up.
This means your payroll will withhold less HECS/HELP, but your overall repayment may still be higher because of your increased repayment income.
By making additional HECS repayments, you will pay off the HECS/HELP faster and the tax savings are often higher than without Salary Packaging. Additional HECS payments can be made by paying more towards your HECS at the start, during or at the end of the financial year. You can also request your payroll department to withhold more tax.
Speak with your payroll about extra withholding.
See the example below from an employee earning $70,000.00 and Salary Packaging the $15,900 FBT cap with HECS repayments.
See the example below from an employee earning $70,000.00 and Salary Packaging the $9,010 FBT cap with HECS repayments.
If you are unsure how Salary Packaging affects your HECS repayments, you can contact us for guidance. You can also calculate your repayments on the ATO website Study and training loan repayment thresholds and rates | Australian Taxation Office.
Child Support Payments
Child Support Payments are calculated based on your Adjusted Taxable Income, which includes reportable fringe benefits. If you have a Child Support arrangement with the Department of Human Services, make sure you report the correct income.
Private child support arrangements are usually not affected by Salary Packaging.
Centrelink Payments
Salary Packaging can change the amount you receive from Centrelink because many Centrelink payments are based on your Adjusted Taxable Income (ATI), not your taxable income alone.
You can include your expected RFBA in the Centrelink income estimate for the year. You can update your family income via MyGov, your Centrelink account on the website or in the app.
Centrelink Payments that may be affected by Salary Packaging:
- Family Tax Benefit
- Child Care Subsidy
- Parenting Payment
- Disability Support Pension
- Carer Allowance
Important
- Let Paywise know you have a HECS debt or if you receive any income tested Centrelink benefits or tax concessions, child support payments, childcare rebate or family tax benefits. We will set up your Salary Packaging account taking this into consideration.
- You can ask your payroll department to adjust your voluntary HECS amount. Speak to us first and we’ll guide you through the process.
- Consider financial advice.
FAQs
How are HECS/HELP repayments calculated?
The ATO is using the repayment thresholds and rates as shown in the table below.
Source: Study and training loan repayment thresholds and rates | Australian Taxation Office
How do I inform Centrelink of my Salary Packaging arrangements?
Centrelink online account help – Update your family income estimate – Services Australia
Disclaimer: This material provides general information only and does not consider your objectives, financial situation or needs. Before making a decision you should consult your independent legal, taxation and financial advisor for advice relating to your personal circumstances. Conditions, fees and charges may apply.