A salary sacrifice or salary packaging is an arrangement where an employee agrees to forego some of their wages in exchange for something of similar value. This agreement must be entered into prior to the income being earned. You can salary package cars, school fees and superannuation, to name a few. A salary sacrifice can reduce your taxable income which is beneficial, in particular, for high income earners. Your employer then has to pay fringe benefits tax (FBT) on the benefits provided to you. Some of these benefits will be used to ascertain what will be your Medicare levy surcharge, tax offsets and other government benefits. o Cars o Health insurance o Loans (usually for a car) o School fees o Childcare fees You will not have to pay tax or Medicare levy on this amount. o Portable electronic devices o Computer software o Protective clothing o Tools of the trade o Briefcases Your employer will not have to pay fringe benefits tax on these. Redirecting some of your pre-tax income into super has benefits for you and your employer. The main benefit for employees entering into a salary sacrificing agreement is that their salary sacrificed contributions increase their super fund account balance. This means they are accumulating more super to fund their retirement. If salary sacrificed super contributions are made to a complying super fund, the sacrificed amount is not considered a fringe benefit for tax purposes. Salary sacrifice contributions are treated as employer contributions. Your employer can usually claim a tax deduction on the amount of salary sacrificed contributions they contribute to your super fund on your behalf. Remember, any salary sacrificed contributions will be taxed by the super fund at 15%, the same as your employer’s contributions. There are also restrictions on the amount of salary sacrifice contributions you can make before you become liable for excess contributions tax. You can salary package if your employer is willing to offer benefits. Most employers will offer salary sacrifice into super to all employees, but may restrict who can package other benefits. Ask your employer what they offer.
What is Salary Sacrificing?
What can I Salary Sacrifice?
Fringe benefits
Exempt benefits
Super
Employee benefits
Employer benefits
Who can salary package?
Salary Sacrifice Calculator
This calculator will help you work out how much better off you will be by salary sacrificing your pay into super rather than contributing to super with ‘take home’ pay.
difference in Take-home pay between making an after-tax contribution and salary-sacrifice contribution
| Annual salary and tax details | After-tax contribution option | Salary sacrifice contribution option |
| Before tax salary | $75,000.00 | $75,000.00 |
| Salary sacrifice contributions | $0.00 | -$5,200.00 |
| Taxable income | $75,000.00 | $69,800.00 |
| PAYG tax | -$17,422.00 | -$15,628.00 |
| After-tax contributions | -$5,200.00 | $0.00 |
| Take-home pay | $52,378.00 | $54,172.00 |
| Super contributions | ||
| Employer SG contributions | $7,125.00 | $7,125.00 |
| Salary sacrifice contributions | $0.00 | $5,200.00 |
| Contributions tax | -$1,068.75 | -$1,848.75 |
| After-tax contributions | $5,200.00 | $0.00 |
| Government co-contributions | $0.00 | $0.00 |
| Low income super contribution | $0.00 | $0.00 |
| Net super contributions | $11,256.25 | $10,476.25 |
| Total take-home pay and net super contributions | $63,634.25 | $64,648.25 |
*Further tax may be payable if you have not provided your TFN to the fund or your contributions for the year exceed the contribution caps. Further tax may also be payable upon payment of a superannuation benefit.