What NSW Health Salary Sacrifice Means for Your Pay Index

What is NSW Health salary sacrifice?

NSW Health salary sacrifice is an arrangement where an employee agrees to forego part of their salary or wage in return for a non-cash benefit of equal cost to the employer. Under the Health Professional Salaries (State) Award 2025 and the Health Employees' Conditions of Employment (State) Award 2025, employees can sacrifice salary to additional employer superannuation contributions or package a range of benefits such as cars, school fees, or electronic devices. The arrangement must be agreed before the employee starts the work to be remunerated, and the employee cannot access the sacrificed salary.

How it works under the awards

Under the Health Professional Salaries Award, an employee may elect to sacrifice part or all of their salary to superannuation, up to 100% of salary or the superannuable salary, whichever is less. Salary packaging is also available, allowing employees to obtain benefits through the NSW Health Salary Packaging scheme. The combined amount of salary sacrifice and packaging can reach 100% of salary. For public hospitals and local health districts, there is a fringe benefit tax (FBT) exemption cap of $17,000 per annum. Benefits above this cap, when grossed-up, attract FBT which the employer may pass on to the employee.

Revenue NSW explains that salary sacrifice can be pre-tax or after-tax. Pre-tax sacrifice reduces the employee's taxable income but the original salary remains liable for payroll tax. For example, if an employee earns $130,000 and sacrifices $10,000 to super, the employer still declares $130,000 for payroll tax purposes: $120,000 as salaries and wages and $10,000 as employer superannuation contributions. This is important because the salary index is calculated on gross ordinary-time earnings, not the reduced taxable amount.

Where does this sit on the Australian salary index?

The salary index measures your gross yearly ordinary-time earnings divided by the national line (index 100 = $108,352 annualised as of May 2026). For the health care and social assistance industry, the index is 97.8, meaning the typical full-time worker in that industry earns about $105,900. A NSW Health professional on an award salary of, say, $100,000 would have an index of about 92.3. Salary sacrifice does not change that index because the index uses the gross earnings before any sacrifice. Your position on the index remains the same regardless of how much you sacrifice to super or package as benefits.

However, salary sacrifice affects your take-home pay and tax position. For instance, if you sacrifice $10,000 to super, your taxable income drops to $90,000, reducing your PAYG withholding. But your superannuation receives an extra $10,000 (concessional contributions). The index, though, stays at 92.3 because it's based on the full $100,000 award salary. This distinction is crucial when comparing your pay to the national average or to other industries. How the index works explains that it uses gross ordinary-time earnings, not net income.

Practical examples

Consider a NSW Health professional earning $120,000 per year under the award. Their salary index is 110.8 (above the national line). If they sacrifice $15,000 to super, their taxable income becomes $105,000, but the index remains 110.8. The employer still pays payroll tax on the full $120,000. The employee benefits from lower tax and higher super, but their index ranking relative to other workers is unchanged.

Another example: a nurse on $85,000 (index 78.4) packages $9,000 worth of benefits (e.g., a car lease) within the FBT cap. Their gross earnings are still $85,000, so the index stays 78.4. The packaging reduces their taxable income by $9,000, but the index does not move. This is why the salary index is a measure of your gross earning power, not your spending power after salary sacrifice.

Key considerations

• Payroll tax: As Revenue NSW notes, salary sacrifice does not reduce payroll tax liability for the employer. The original salary is still declared.
• Superannuation: Pre-tax salary sacrifice contributions are treated as employer contributions and are concessional if within caps. They count towards the super guarantee but do not affect the index.
• FBT: Benefits provided under salary packaging may incur FBT if they exceed the exemption cap. The cost is often passed to the employee, reducing the net benefit.
• Award entitlements: Under the award, allowances, penalty rates, overtime, and other payments based on salary are calculated using the salary that would have applied without sacrifice. So your overtime rate, for example, is based on your full award salary, not the sacrificed amount.

Why it matters for your pay index

The salary index is a benchmark for comparing earnings across industries and states. For NSW Health workers, the index for the health care and social assistance industry is 97.8, slightly below the national average. But within that, individual salaries vary by classification, experience, and location. Salary sacrifice does not change your index, but it does change your financial position. When you see your index number, remember it reflects your gross ordinary-time earnings, not your take-home pay after sacrifice. For more on how different industries compare, see industries and states.

If you're considering salary sacrifice, check your award conditions and speak with your employer or a salary packaging provider. The pay guides on this site can help you understand award rates and how they translate to index figures.