Here’s how it works for Vanessa.

Vanessa is an administration assistant, earning $45,000 a year with a student HELP debt. As Vanessa works for a not for profit organisation, she can package up to $15,900 for living expenses. Vanessa’s Reportable Fringe Benefit Amount takes her income above the threshold and means she has to start making HELP repayments of $2,364 a year.

This payment is covered by the tax saving that Vanessa makes by salary packaging (i.e. $4,419), meaning she is effectively paying off her student HELP debt with money she would otherwise be paying to the Australian Tax Office as tax.

So by salary packaging the full $15,900 towards living expenses, Vanessa reduces her taxable income, starts to pay off her HELP debt and still increases her take-home pay by $2,055.

Here’s a breakdown:

Without

Salary Packaging

With

Salary Packaging

Vanessa’s Gross Salary

45,000

45,000

Pre-tax living expenses

15,900

Tax and Medicare

(7,072)

(2,653)

Student HELP debt repayment

0

(2,364)

Living expenses

15,900

0

Take home pay

24,083

Difference in take home pay

0

2,055

Total tax savings

0

4,419

Vanessa starts to pay off her HELP debt AND increases her take-home pay by $2,055.