What Can Be Salary Sacrificed in Australia? A Guide to Gross Pay, Super, and Tax

What Can Be Salary Sacrificed in Australia?

Salary sacrifice is a common way to reduce your tax bill by swapping some of your gross pay for benefits. In Australia, the rules come from the ATO, Fair Work, and your specific employment agreement. This guide explains what can be salary sacrificed, how it affects your gross pay, super, and tax, and where you sit on the Salary Index.

How Salary Sacrifice Works

When you salary sacrifice, your employer pays for a benefit using your pre-tax income. Your gross pay stays the same for the purpose of the Salary Index — which measures full-time adult ordinary-time earnings — because the index uses total remuneration before any sacrifice. For example, if you earn $108,352 a year (index 100), sacrificing $10,000 to super still leaves your index at 100. But your taxable income drops to $98,352, saving you tax at your marginal rate.

Common Items You Can Salary Sacrifice

Additional super contributions are the most popular. You can salary sacrifice up to the concessional contributions cap (set by the ATO each year). From 1 July 2026, the super guarantee is 12% on ordinary time earnings, but salary sacrifice to super is an employer contribution that counts toward the cap. It's taxed at 15% inside super, which is often lower than your marginal rate.

Cars through a novated lease are another common option. The lease payments, fuel, insurance, and maintenance come from your pre-tax salary. Fringe benefits tax (FBT) may apply, but many employers use the statutory formula to reduce the taxable value.

Electronic devices like laptops, tablets, and phones can be salary sacrificed if they are primarily work-related. The ATO requires a clear business purpose, and FBT may be exempt if the device is used mainly for work.

Other benefits include childcare (through some employers), gym memberships (if on business premises), and parking. Public sector and not-for-profit employees often have broader salary packaging options, such as living-away-from-home allowances.

What Cannot Be Salary Sacrificed?

You cannot salary sacrifice items that are private in nature, such as rent, mortgage payments, school fees, or general living expenses — unless you work in a remote area or under a specific arrangement (e.g., a charity). The ATO considers these as ordinary living costs, not fringe benefits.

Impact on Super Guarantee and Awards

Your super guarantee is based on ordinary time earnings (OTE). If your salary sacrifice reduces your OTE — for example, by sacrificing part of your base salary for a car — your employer's compulsory super contribution may also fall. However, many awards and enterprise agreements define OTE as the rate before any sacrifice, so check your pay guides or contract.

Modern awards set minimum wages and conditions. Salary sacrifice cannot reduce your award entitlement — you must still receive at least the minimum hourly rate. For example, the national minimum wage from 1 July 2026 is $26.44 per hour (index 48.2). If you sacrifice part of your pay, your employer must still pay you at least that amount in cash or benefits.

Tax Implications of Salary Sacrifice

Salary sacrifice lowers your taxable income, so you pay less income tax and Medicare levy (2%). For 2026–27, resident tax rates are:

• $0–$18,200: nil
• $18,201–$45,000: 15%
• $45,001–$135,000: 30%
• $135,001–$190,000: 37%
• Over $190,000: 45%

If you earn $100,000 and sacrifice $10,000 to super, your taxable income becomes $90,000. You save $3,000 in tax (30% of $10,000), but the super contribution is taxed at 15% inside the fund — a net saving of $1,500. However, be aware of the concessional contributions cap; exceeding it incurs additional tax.

Salary Sacrifice by State and Industry

Your ability to salary sacrifice may vary by state and industry. For example, Western Australia has a higher average wage (index 106.9), and mining companies often offer generous salary packaging. In retail trade (index 75.9), salary sacrifice is less common. The ACT (index 109.9) has many public servants who can package a wide range of benefits.

How the Salary Index Helps

The Salary Index compares your gross pay to the national line of 100. Since salary sacrifice doesn't change your gross pay, your index stays the same. But understanding your index helps you see where you stand relative to the average worker, which can inform your salary sacrifice decisions. For instance, if you're on index 75 (retail), sacrificing a car might be less beneficial than if you're on index 150 (mining), because your marginal tax rate is lower.

Final Tips

• Always check your award or enterprise agreement before starting salary sacrifice.
• Use the ATO's online tools to estimate your tax savings.
• Remember that salary sacrifice can reduce your employer's super guarantee if it lowers your OTE.
• If you're unsure, talk to a tax professional or your payroll department.

Salary sacrifice is a powerful way to manage your tax and super, but it's not one-size-fits-all. Use the topics page to explore more about Australian pay and benefits.