How public benevolent institution salary sacrifice affects your gross pay, super and tax

What is public benevolent institution salary sacrifice?

A public benevolent institution (PBI) is a charity or not-for-profit organisation that provides direct welfare services, such as aged care, disability support, or emergency relief. Employees of PBIs can often access salary sacrifice arrangements, which allow them to exchange part of their gross pay for benefits like extra superannuation, a car, or living expenses. This reduces their taxable income, lowering the amount of income tax and Medicare levy they pay.

Salary sacrifice is not a new salary; it's a way to structure your existing pay. Your employer still pays the same total cost, but part of it goes to a benefit instead of cash. The key advantage is that the sacrificed amount is not subject to income tax (though it may be subject to fringe benefits tax, which PBIs often have exemptions for).

How salary sacrifice interacts with gross pay and the salary index

The Salary Index measures full-time adult ordinary-time earnings, where 100 equals $108,352 per year (based on ABS Average Weekly Earnings, May 2026). For a PBI employee, your gross pay before sacrifice is what would be compared to this index. However, because salary sacrifice reduces your taxable income, your take-home pay may be lower than someone earning the same gross pay without sacrifice, but your super or other benefits increase.

For example, if you earn $80,000 gross and sacrifice $15,000 to super, your taxable income is $65,000. Your gross pay is still $80,000, so your salary index would be 73.8 (80,000 / 108,352 × 100). But your super balance grows faster. The industry index for health care and social assistance (which covers many PBIs) is 97.8, annualised about $105,968. This suggests that typical PBI roles may pay close to the national average, but individual roles vary.

Impact on superannuation

Super guarantee (SG) contributions are 12% of your ordinary-time earnings from 1 July 2026. If you salary sacrifice to super, those contributions count towards the SG obligation. Your employer must still pay 12% on your reduced gross salary (the amount after the sacrifice). For instance, if your gross salary is $80,000 and you sacrifice $15,000 to super, your SG base is $65,000, so your employer contributes $7,800 (12% of $65,000). Your total super contributions for the year would be $22,800 ($15,000 sacrificed + $7,800 SG). This can be a powerful way to build retirement savings.

However, be aware of the concessional contributions cap ($30,000 in 2026–27). If your total super contributions (including SG and salary sacrifice) exceed this cap, you pay extra tax. Also, salary sacrificing to super does not reduce your SG entitlement; it just changes how the total is allocated.

Tax considerations

Salary sacrifice reduces your taxable income, so you move into a lower tax bracket. Using 2026–27 resident tax rates (tax-free threshold up to $18,200, then 15% up to $45,000, 30% up to $135,000, etc.), the tax saving can be significant. For example, an employee earning $80,000 who sacrifices $15,000 saves about $4,500 in income tax plus $300 in Medicare levy (2%). But the sacrificed amount may be subject to fringe benefits tax (FBT) if the benefit is not exempt. PBIs often have FBT exemptions for benefits like salary sacrificing a car or living expenses, up to certain limits.

It's important to note that salary sacrifice does not affect your entitlement to the low-income tax offset or other offsets, but it may reduce your eligibility for some government benefits based on taxable income.

Comparing with other sectors

The pay guides on Salary Index show that different industries have different index values. For example, retail trade is 75.9, while professional services is 114.7. PBI roles often fall under the health care and social assistance industry (index 97.8) or education and training (105.5). If you work in a PBI that is also a hospital, your pay may be under a specific award like the Nurses Award or Health Professionals and Support Services Award. These awards set minimum pay rates that are higher than the national minimum wage.

State variations

Your location also affects your pay relative to the national line. For instance, the ACT has an index of 109.9 (annualised $119,090), while Tasmania is 88.6 ($96,008). If you work for a PBI in the ACT, your pay is likely higher than the national average, but salary sacrifice still works the same way. The states page provides more detail on regional differences.

Practical example

Consider a full-time employee at a PBI in Victoria earning $75,000 gross per year. They decide to salary sacrifice $10,000 to super and $5,000 for a car (using a novated lease). Their taxable income becomes $60,000. Their SG is 12% of $60,000 = $7,200. Total super contributions: $10,000 + $7,200 = $17,200. They pay income tax on $60,000: $5,092 plus 30% on the amount over $45,000 ($15,000 × 30% = $4,500) = $9,592, plus Medicare levy $1,200, total tax $10,792. Without sacrifice, tax on $75,000 would be about $15,467. They save $4,675 in tax. Their take-home pay is lower, but they have more super and a car.

Important caveats

Salary sacrifice arrangements must be agreed in writing with your employer and comply with your award or enterprise agreement. Some awards prohibit salary sacrifice for certain items. Also, the ATO has rules about 'otherwise deductible' rules and FBT. Always seek professional advice or check with your payroll department.

For more information on how the index works, see how the index works. You can also explore topics related to salary sacrifice and not-for-profit employment.