How to compare job offers when you can sacrifice salary

What does 'sacrifice salary' mean in a job ad?

When you see 'salary sacrifice' or 'salary packaging' in a job ad, it means you can swap part of your pre-tax pay for benefits your employer provides. The Australian Taxation Office () defines it as an agreement to receive less income before tax in return for benefits of similar value. This reduces your taxable income, so you pay less income tax. But it also changes how your pay compares to the national line.

How the salary index works with sacrificed pay

The salary index compares your yearly gross ordinary-time earnings to the national benchmark: full-time adult ordinary-time earnings of $2,083.70 per week, annualised to $108,352 (ABS Average Weekly Earnings, May 2026). If you earn $65,000 before any sacrifice, your index is 60.0. If you sacrifice $17,353 for a car, your taxable income drops to $47,647, but your gross pay (the figure used for the index) is still $65,000. The index stays at 60.0. However, your take-home pay changes.

The ATO's example: Sam's car packaging

The ATO provides a detailed example for Sam, earning $65,000 annually. He considers a car worth $35,000 with running costs of $11,500. The table compares three scenarios:

1. No salary sacrifice: Taxable income $65,000, income tax $10,288, Medicare $1,300, car expenses $11,500 – net disposable income $41,912.
2. Salary sacrifice without employee contributions: Sacrifice $17,353, taxable income $47,647, tax $5,082, Medicare $953, no car expenses – net disposable income $41,612 (slightly less).
3. Salary sacrifice with employee contributions of $7,000: Sacrifice $4,145, taxable income $60,855, tax $9,045, Medicare $1,217, plus employee contribution $7,000 – net disposable income $43,593 (higher).

The key takeaway: employee contributions can make packaging worthwhile. Without them, you might end up with less cash in hand.

What the index doesn't show

The salary index uses gross ordinary-time earnings before any sacrifice. It doesn't reflect your actual take-home pay after packaging. When comparing job offers, you need to look beyond the index figure. Ask the employer:

• Is salary packaging available?
• What benefits are offered (car, super, school fees, etc.)?
• Are employee contributions required to reduce FBT?
• How does packaging affect my super guarantee? (Your employer must still pay 12% on your ordinary time earnings, not the sacrificed amount – see how the index works for more on super).

Impact on tax and government benefits

Salary sacrificing reduces your taxable income, which can lower your tax bill. But it may also affect:

• Medicare levy surcharge: If your income for surcharge purposes (including reportable fringe benefits) exceeds the threshold, you may pay the surcharge.
• Study and training loan repayments: Compulsory repayments are based on your repayment income, which includes reportable fringe benefits.
• Tax offsets: Some offsets phase out with income.
• Child support and government benefits: Lower taxable income may reduce child support payments or affect Family Tax Benefit.

The ATO warns that you should consider these impacts before entering an arrangement. Seek financial advice.

Changes from 1 April 2027

From 1 April 2027, work-related items provided through salary sacrifice will no longer be exempt from FBT. This means laptops, phones, and tools you use for work may become taxable benefits. If you're comparing job offers now, check whether the packaging includes such items and how the change might affect you.

How to compare offers with packaging

When you have two job offers – one with salary packaging, one without – compare net disposable income, not just gross salary. Use the ATO's method: start with annual remuneration, subtract the sacrifice amount, calculate tax and Medicare, then subtract any employee contributions and expenses you'd otherwise pay. The result is your cash in hand.

For example, if Offer A pays $70,000 with no packaging, and Offer B pays $65,000 with a car package worth $12,000 (and you'd normally spend $11,500 on a car), you might end up better off with Offer B if employee contributions are structured well. Run the numbers.

The role of awards and super

Your salary sacrifice arrangement must comply with your award or enterprise agreement. The Fair Work Commission regulates employment conditions. You cannot sacrifice entitlements you've already earned (like accrued leave). Super guarantee contributions are calculated on your ordinary time earnings, not the sacrificed amount. So if you sacrifice $10,000, your employer still pays 12% on your full $65,000 (or whatever your base is).

Final thoughts

Salary sacrificing can boost your take-home pay if structured with employee contributions. But it lowers your taxable income, which may affect government benefits and loan repayments. When reading a job ad, look for 'salary packaging available' and ask for details. Use the salary index to compare gross pay, but always calculate net disposable income for a true comparison. For more on how pay benchmarks work, see pay guides and topics.