Salary sacrificing lets nurses pay for certain expenses from pre-tax salary, which reduces taxable income and can lift take-home pay. Public and not-for-profit health employees often access generous FBT concessions, packaging living expenses up to an annual cap plus a separate meal entertainment cap, on top of salary sacrificing into super.

If you’re a nurse working in a public hospital, you may be leaving thousands of dollars on the table every year without knowing it. Salary sacrifice — particularly the FBT exemption available to public hospital nurses — is one of the most underutilised tax strategies in Australian healthcare. Yet most nurses have never been shown how to use it properly.

The good news? You don’t need a complicated strategy or a business structure to access these savings. In many cases, a simple conversation with your payroll department can put an extra $3,000 to $4,000 back into your pocket every year — completely legally.

In this guide, I’ll walk you through exactly how salary sacrifice works for nurses in Australia, including the powerful FBT exemption available to public hospital staff, how super and novated leases fit in, and the common mistakes that cost nurses money every year.

What Is Salary Sacrifice?

Salary sacrifice is an arrangement between you and your employer where you agree to receive a lower gross salary in exchange for your employer providing certain non-cash benefits. The key benefit? Those packaged items come out of your pre-tax income, which means your taxable income drops — and so does the tax you pay.

Here’s a simple example. If you earn $85,000 per year and you salary sacrifice $10,000 worth of approved benefits, you only pay income tax on $75,000. At the 32.5% marginal rate, that saves you around $3,250 in income tax.

Salary sacrifice is available to most Australian employees, but the types of benefits you can package — and how tax-effective they are — depends heavily on your employer. For nurses, the employer you work for makes an enormous difference.

The Big One: The FBT Exemption for Public Hospital Nurses

This is the section that will change how you think about your pay packet. If you work at a public hospital, you have access to one of the most generous tax concessions available to any employee in Australia — and most nurses don’t fully use it.

Why Public Hospitals Are Different

Under Australian tax law, public hospitals are classified as Public Benevolent Institutions (PBIs) under the Fringe Benefits Tax Assessment Act 1986. Because of this classification, the Australian Taxation Office grants them a special FBT exemption that allows their employees to salary package a generous amount of living expenses completely free of Fringe Benefits Tax.

For other employers, salary packaging benefits usually attracts Fringe Benefits Tax at a rate of 47%, which eats into most of the tax saving. But for PBI employers like public hospitals, that FBT simply doesn’t apply — up to a certain threshold.

The $9,010 Living Expenses Cap

As a nurse employed by a public hospital (or other PBI employer), you can salary package up to $9,010 per year in living expenses completely tax-free. This figure is set by the ATO and applies for the current FBT year.

What counts as “living expenses” under this cap? Essentially, almost any personal expense you already pay:

• Mortgage repayments or rent payments
• Credit card bills
• Personal loan repayments
• Car registration and insurance
• Utility bills (gas, electricity, water)
• School fees
• Groceries and everyday household costs

That’s right — you can have your employer pay your rent or mortgage directly from your pre-tax salary, completely free of FBT. This is an enormous concession that is simply not available to most Australians outside of the PBI sector.

The $2,650 Meal Entertainment Cap

On top of the $9,010 living expenses cap, public hospital nurses can salary package an additional $2,650 per year in meal entertainment expenses — things like restaurant meals and café expenses. This is a separate cap and does not reduce your $9,010 living expenses entitlement.

A Real Numbers Example

Let’s make this concrete. Consider a nurse earning $85,000 per year at a public hospital in Australia. By salary packaging the full $9,010 in living expenses, their taxable income drops to approximately $75,990.

At the 32.5% marginal income tax rate, that single move saves approximately $2,927 in income tax per year. If they also salary package the full $2,650 in meal entertainment, that’s an additional tax saving of around $861.

Total potential annual tax saving: approximately $3,788 — just from these two benefits alone.

That’s nearly $4,000 per year back in your pocket, every single year, for the rest of your nursing career — simply by filling out a form with your payroll team.

Important: This Is Not Available at Private Hospitals

It’s critical to understand that this FBT exemption is tied to your employer’s PBI status — not to you personally as a nurse. If you move from a public hospital to a private hospital, you lose access to this concession entirely. Private hospitals are generally not classified as PBIs, so their employees are subject to standard FBT rules. The $9,010 and $2,650 caps simply do not apply.

Some private sector aged care providers and certain charities are classified as PBIs — so if you work in those settings, it’s worth checking your employer’s status with your HR or payroll team. When in doubt, ask.

Super Salary Sacrifice — Available to All Nurses

Super salary sacrifice is available regardless of whether you work at a public or private hospital. It works by making additional concessional (pre-tax) contributions to your superannuation fund, reducing your taxable income in the process.

Here’s why it’s powerful:

• Contributions into super are taxed at just 15% inside the fund
• Compare that to your marginal income tax rate of 32.5% to 45% depending on your income
• The difference is pure tax saving

For the 2025-26 financial year, the concessional contributions cap is $30,000 per year. This cap includes your employer’s compulsory Super Guarantee (SGC) contributions of 11.5%, so the amount you can contribute personally will depend on what your employer puts in.

There’s also a carry-forward provision. If your total super balance is under $500,000 and you haven’t maxed out your concessional cap in previous years, you may be able to carry forward unused cap amounts and make larger contributions this year. This can be especially useful if you’ve had time out of the workforce or worked part-time.

Super salary sacrifice is particularly worth considering for nurses who are:

• In their 40s or 50s and wanting to accelerate their retirement savings
• In higher-income brackets (earning over $120,000) where the income tax saving is significant
• Looking to reduce assessable income before an important financial decision (like a property settlement)

You can read more about concessional contributions limits on the ATO website.

Novated Car Leases for Nurses

A novated lease is a three-way arrangement between you, your employer, and a finance company that allows you to lease a vehicle using pre-tax salary. Most public hospitals and major health networks offer novated leasing as part of their salary packaging program.

The tax benefit comes from the fact that your car repayments — including fuel, registration, insurance, tyres, and servicing — are all paid from pre-tax dollars. You also save GST on the purchase price and running costs.

For public hospital nurses, novated leases can be structured within or alongside the $9,010 FBT cap depending on how your salary packaging provider sets it up. Private hospital nurses can still access novated leases, but standard FBT rules will apply on the private use component.

Novated leases work best for nurses who:

• Drive significant distances — to and from work, between sites, or for work-related travel
• Are in the market for a new vehicle anyway
• Can commit to a 2-5 year lease term

Before entering a novated lease, it’s worth having an accountant review the numbers to make sure it stacks up for your situation. The savings are real, but so are the obligations.

Portable Electronic Devices and Laptops

Nurses can also salary sacrifice portable electronic devices that are primarily used for work purposes. This includes:

• Laptops and tablets (for clinical documentation, research, or continuing education)
• Smartphones (used for work communications and clinical apps)

These items are exempt from FBT if they’re primarily for work use, and you can package one device per category per FBT year. This means you could package both a laptop and a smartphone in the same year as separate exempt items.

For nurses who use their own devices for accessing clinical systems, patient management apps, or professional development, this concession can save several hundred dollars per year. See your employer’s salary packaging guide or speak with Pinnacle to understand how this applies in your situation.

Private vs Public Hospital — What’s the Difference?

This comparison is so important it deserves its own section. Here’s a clear breakdown:

Public hospital nurses (PBI employees):

• Super salary sacrifice
• Novated car lease
• Portable electronic devices
• $9,010 per year in living expenses, completely FBT-free
• $2,650 per year in meal entertainment, FBT-free

Private hospital nurses:

• Super salary sacrifice
• Novated car lease (with FBT on private use)
• Portable electronic devices
• No access to the $9,010 living expenses or $2,650 meal entertainment FBT exemptions

The gap in value is significant. A public hospital nurse can access close to $4,000 per year in tax savings that a private hospital nurse simply cannot access. If you’re considering a move between sectors, it’s worth factoring this in — a slightly lower salary at a public hospital could still leave you better off after accounting for the additional salary packaging benefits.

Some private sector aged care providers and charities may also be classified as PBIs. If you work in aged care or the not-for-profit sector, it’s worth checking your employer’s FBT status with HR or payroll before assuming you don’t have access to these concessions.

How to Get Started with Salary Packaging at Your Hospital

The process is more straightforward than most nurses expect. Here’s what to do:

1. Contact your payroll or HR department. Ask whether your employer offers salary packaging and which benefits are available.
2. Find out which salary packaging administrator your hospital uses. Most major public hospitals use specialist administrators such as McMillan Shakespeare, RemServ, or SmartSalary. They handle all the paperwork and can explain your options.
3. Set up your packaging elections. You’ll nominate which benefits you want to package (living expenses, meal entertainment, etc.) and the amounts. Most administrators have online portals where you can do this.
4. Review annually. Your circumstances change — so should your salary packaging strategy. Don’t set and forget. Review your elections at least once a year, especially if your income, family situation, or employer changes.

You don’t need an accountant to set up salary packaging through your employer’s approved administrator. But a tax adviser can help you optimise the strategy — particularly around balancing living expenses packaging with super contributions, or understanding the interaction between salary packaging and your tax return.

At Pinnacle, we work with nurses and healthcare professionals to build a tax strategy that makes the most of every concession available to them. Our tax planning service includes a review of your salary packaging elections as part of a broader strategy.

Common Mistakes Nurses Make with Salary Sacrifice

After working with healthcare professionals on their tax strategies, I see the same mistakes come up repeatedly:

1. Not using the full cap. Many nurses only package a portion of the $9,010 living expenses cap, leaving the rest unused. Every dollar of unused cap is a missed tax saving.
2. Not packaging super in high-income years. If you’re earning overtime, working double shifts, or receiving a significant pay rise, that’s often the best year to maximise your super contributions and bring your taxable income down.
3. Forgetting to update when changing jobs. If you move from a public hospital to a private one, you lose your PBI status immediately. Your salary packaging needs to be reviewed and restructured.
4. Not keeping records of how benefits are used. Your salary packaging administrator tracks most things, but you should keep your own records — especially for meal entertainment claims.
5. Assuming it’s too complicated. Many nurses assume salary sacrifice involves complex forms and ongoing admin. In practice, the administrator does most of the work. A single setup conversation can unlock years of tax savings.

Frequently Asked Questions

Am I eligible for the FBT exemption as a nurse?

Eligibility depends on your employer, not your profession. If you work for a public hospital or another organisation classified as a Public Benevolent Institution, you have access to the $9,010 living expenses and $2,650 meal entertainment FBT exemptions. If you work for a private hospital or a non-PBI employer, these specific exemptions do not apply — though you can still salary sacrifice super and a novated car lease.

Can I salary sacrifice at a private hospital?

Yes, but your options are more limited than at a public hospital. Private hospital nurses can still salary sacrifice into super and access a novated car lease, but they do not have access to the FBT-free living expenses and meal entertainment caps available to PBI employees. Standard FBT rules apply, which significantly reduces the tax benefit of packaging general living expenses.

What is the maximum I can salary package tax-free as a public hospital nurse?

For the current FBT year, public hospital nurses can package up to $9,010 per year in living expenses and an additional $2,650 per year in meal entertainment, both completely free of Fringe Benefits Tax. On top of this, you can contribute up to the concessional super cap of $30,000 per year (including your employer’s SGC contributions). These figures are set by the ATO and may change from year to year.

Does salary sacrifice affect my home loan borrowing capacity?

This is worth checking with your mortgage broker before making changes. Salary sacrifice reduces your gross income as reported to lenders, which can affect your assessed borrowing capacity. Some lenders “gross up” the packaged amount and treat it as income — but not all do. If you’re planning to apply for a home loan in the next 12 months, discuss the timing of your salary sacrifice elections with your broker and accountant beforehand.

Should I salary sacrifice super or living expenses?

For public hospital nurses with access to the FBT exemption, the living expenses and meal entertainment caps are usually the highest priority — they’re dollar-for-dollar savings with no FBT cost. Super salary sacrifice is a great next step, especially if you’re approaching retirement or in a high marginal tax bracket. The right answer depends on your individual circumstances, which is where a personalised consultation with a tax adviser can make a real difference.

Ready to Review Your Salary Sacrifice Strategy?

If you’re a nurse and you haven’t fully explored your salary packaging options, there’s a good chance you’re paying more tax than you need to. The FBT exemption alone can be worth close to $4,000 per year — and that’s before we look at super, novated leases, or other strategies.

At Pinnacle Accounting & Advisory, Mina Baselyous works with nurses and healthcare professionals to build tax strategies that are practical, compliant, and tailored to their actual situation. Book a Consultation and let’s work out exactly what you could be saving.

Book a Consultation →

Frequently Asked Questions

This article contains general advice only and does not take into account your specific circumstances. Please speak with a qualified accountant or tax adviser before making financial decisions.

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