What Can I Salary Sacrifice? A Guide to State and Industry Differences in Australia

What Is Salary Sacrifice?

Salary sacrifice is an arrangement where you agree with your employer to give up part of your before-tax salary in exchange for benefits that your employer provides. Common examples include extra superannuation contributions, a car through a novated lease, electronic devices, or even childcare. Because the sacrificed amount is not included in your assessable income, you pay less income tax and Medicare levy. However, some benefits attract Fringe Benefits Tax (FBT), which can reduce the overall saving.

The key to understanding salary sacrifice is your marginal tax rate. The more you earn, the higher your tax bracket and the more you save by sacrificing. That is where state and industry differences come in. The Salary Index shows how average full-time adult ordinary-time earnings vary across Australia. The national line is 100, equal to $108,352 a year (based on $2,083.70 per week, ABS Average Weekly Earnings May 2026). If you work in a state or industry with an index well above 100, your pay is likely higher, giving you more scope to sacrifice and a bigger tax benefit.

How State Differences Affect Salary Sacrifice

State average pay indices range from Tasmania’s 88.6 (annualised $96,008) to the ACT’s 109.9 ($119,090). A worker on the ACT average is in the 30% tax bracket (income between $45,001 and $135,000 for 2026–27), while a Tasmanian on the state average is also in the 30% bracket but with less room before hitting the next threshold. The higher your pay, the more you can sacrifice before dropping into a lower bracket, and the greater the tax saving per dollar sacrificed.

For example, a worker in the ACT earning $119,090 could sacrifice $10,000 into super and reduce their taxable income to $109,090, saving $3,000 in tax (30% bracket) plus $200 Medicare levy (2%). A Tasmanian earning $96,008 sacrificing the same $10,000 would also save $3,000 in tax plus $200 Medicare levy, but their remaining income is lower, so the relative impact is larger. However, the Tasmanian may have less disposable income to spare for sacrifice.

State differences also affect the types of sacrifice that make sense. In high-cost states like NSW (index 101.2) or ACT, salary sacrificing a car or housing may be more attractive due to higher living costs. But remember, salary sacrifice cannot reduce your pay below the applicable minimum wage or award rate. The states page shows how each state’s average compares, but your actual pay depends on your employer and award.

How Industry Differences Affect Salary Sacrifice

Industry pay indices vary even more than states. Mining has an index of 154.7 (annualised $167,600), while Retail trade is 75.9 ($82,240) and Accommodation and food services is 72.5 ($78,555). A miner on the industry average is in the 37% tax bracket (income $135,001 to $190,000), so each dollar sacrificed saves 37 cents in tax plus 2 cents Medicare levy. A retail worker on $82,240 is in the 30% bracket, so their saving is lower per dollar.

Because mining workers earn well above the national line, they can sacrifice larger amounts into super or other benefits without hitting the concessional cap ($27,500 for 2026–27). In retail or hospitality, pay is closer to the national minimum wage ($52,255 annualised, index 48.2), so there is little room to sacrifice without falling below award minimums. The industries page lists more benchmarks.

Common Items You Can Salary Sacrifice

• Extra super contributions: The most popular. You can sacrifice up to the concessional cap (including your employer’s 12% super guarantee). This is especially valuable for high earners in mining, professional services (index 114.7), or education (105.5).
• Novated lease car: Pre-tax payments for a car, fuel, maintenance, and insurance. FBT applies to private use, but the tax saving can still be worthwhile if you drive for work.
• Electronic devices: Laptops, tablets, phones – if used for work. Usually exempt from FBT if primarily for work.
• Childcare: Some employers offer salary sacrifice for childcare, but it is subject to FBT and may not be as beneficial as the Child Care Subsidy.
• Other benefits: Gym memberships, health insurance, or parking – but these often attract FBT and may not be worth it unless your employer absorbs the tax.

Tax and Super Considerations

Salary sacrifice reduces your assessable income, so you pay less tax and Medicare levy. For 2026–27, resident tax rates are: nil up to $18,200; 15% from $18,201 to $45,000; 30% from $45,001 to $135,000; 37% from $135,001 to $190,000; 45% above $190,000. Plus 2% Medicare levy. The higher your bracket, the more you save.

Super guarantee is 12% from 1 July 2026, calculated on your ordinary-time earnings before sacrifice. Your employer must still pay this. But salary sacrifice contributions count toward your concessional cap. If you exceed $27,500, you pay extra tax. Check your total contributions.

Awards and minimum wages set a floor. You cannot sacrifice below the relevant minimum hourly rate. For example, the national minimum wage is $26.44/hr ($1,004.90/week). If your award rate is higher, that is your floor. Always check your pay guides or award.

Is Salary Sacrifice Right for You?

Salary sacrifice works best if you earn above the average and have expenses you would pay anyway. Workers in high-index states like ACT (109.9) or Western Australia (106.9) and high-index industries like Mining (154.7) or Professional services (114.7) get the most benefit. But even in lower-index states or industries, sacrificing into super can still save tax if you are in the 30% bracket or above.

Before setting up a salary sacrifice, talk to your employer or a financial adviser. Consider your cash flow, FBT implications, and contribution caps. The topics page has more on related pay and tax issues.

Summary

• Salary sacrifice lets you swap pre-tax pay for benefits, reducing your tax.
• Your state’s average pay index affects how much you can realistically sacrifice.
• Industry pay differences are even larger – mining workers can sacrifice more than retail workers.
• Common sacrifices: super, car, electronics.
• Always stay above award minimums and watch the concessional cap.

Use the Salary Index to see where your pay sits against the national line, and check how the index works for more detail.