How Does Salary Sacrificing Work When Comparing Job Offers

How Does Salary Sacrificing Work When Comparing Job Offers

When you're reading a job ad and comparing offers, the headline salary is only part of the picture. Many Australian employers offer salary sacrificing – a way to swap some of your pre-tax pay for benefits that can reduce your tax bill. Understanding how salary sacrificing works helps you see the real value of an offer, especially when one role has a lower base salary but better packaging options.

What is salary sacrificing?

Salary sacrificing (also called salary packaging) is an agreement between you and your employer. You choose to receive less cash salary in exchange for a benefit of similar value. The benefit is paid from your pre-tax income, so you don't pay income tax on that portion. Common benefits include:

• Additional super contributions
• A car (through a novated lease)
• Electronic devices (laptops, phones)
• Childcare fees
• Mortgage or rent payments (in some non-profit sectors)

The sacrificed amount is still subject to fringe benefits tax (FBT) in many cases, but employers often pass on the FBT cost or choose benefits that are exempt, like super contributions.

How salary sacrificing affects your take-home pay

Let's say you're comparing two job offers. Offer A has a base salary of $95,000 with no salary sacrifice options. Offer B has a base salary of $90,000 but allows you to salary sacrifice up to $15,000 into super. At first glance, Offer A looks better. But after tax, Offer B might leave you with more in your pocket.

Using the 2026–27 tax rates (nil up to $18,200, 15% to $45,000, 30% to $135,000, plus 2% Medicare levy), here's a rough comparison:

• Offer A: taxable income $95,000, tax + Medicare ~$22,267, take-home ~$72,733
• Offer B: taxable income $75,000 (after $15,000 super sacrifice), tax + Medicare ~$15,967, take-home ~$59,033

But wait – the $15,000 in super is taxed at 15% inside the fund, so you effectively have $12,750 in super. Your total benefit (take-home + super) is $71,783, which is less than Offer A's $72,733. However, if you value super savings highly, or if you're on a higher marginal rate, the numbers shift. Also, some employers calculate the super guarantee on the pre-sacrifice salary, which can boost your super further.

Using the Salary Index to benchmark offers

The Salary Index sets 100 as full-time adult ordinary-time earnings – $108,352 annualised (based on ABS Average Weekly Earnings, May 2026). This figure is gross ordinary-time earnings before any salary sacrifice. So when you see a job ad quoting a salary of $100,000, that's an index of about 92.3. Salary sacrificing doesn't change the index because the index is based on the gross pay before any sacrifice.

When comparing offers, you can use the index to see where the base salary sits relative to the national line. For example, an offer in Western Australia (state index 106.9) might have a higher base than one in Tasmania (88.6), but salary sacrifice options could narrow the gap.

Salary sacrificing and the super guarantee

From 1 July 2026, the super guarantee is 12% on ordinary-time earnings up to the maximum contribution base ($270,830). If you salary sacrifice into super, your ordinary-time earnings for the guarantee calculation may be reduced. Some employers calculate the guarantee on the pre-sacrifice amount – check your employment contract or award. The Fair Work Ombudsman provides guidance on how salary sacrifice interacts with award entitlements.

Tax considerations

Salary sacrificing reduces your taxable income, which can lower your marginal tax rate. For example, if you earn $140,000 (37% marginal rate) and sacrifice $10,000 into super, your taxable income drops to $130,000 (still 37% bracket, but you save $3,700 in tax plus $200 Medicare). The super contributions are taxed at 15% within the fund, so the net benefit is $2,500.

Be aware of the concessional contributions cap ($30,000 in 2026–27). Exceeding it incurs additional tax. Also, if you have a HELP debt, salary sacrificing reduces your repayments because they are based on your taxable income.

Comparing offers with salary sacrifice

When you read a job ad, look for phrases like "salary packaging available" or "novated lease options." Ask the employer:

• What benefits can be salary sacrificed?
• Is the super guarantee calculated on pre- or post-sacrifice salary?
• Are there any fees or FBT costs passed on to you?

Use the pay guides to check award minimums and entitlements. The industries page shows typical index figures – for example, retail trade is 75.9, while professional services is 114.7. A retail role with salary sacrifice might be more competitive than it first appears.

Example: Comparing two similar roles

Imagine you have two offers in the health care sector (industry index 97.8):

• Role 1: $85,000 base, no salary sacrifice
• Role 2: $80,000 base, can sacrifice up to $10,000 into super

Role 1 index: 85,000 / 108,352 * 100 = 78.4 Role 2 index: 80,000 / 108,352 * 100 = 73.8

But after tax and super:

• Role 1: taxable $85,000, tax ~$18,667, take-home ~$66,333
• Role 2: taxable $70,000, tax ~$13,867, take-home ~$56,133, plus $8,500 in super (after 15% tax) = total $64,633

Role 1 still gives more cash now, but Role 2 boosts your super. If you're close to retirement, Role 2 might be better.

Final tips

• Always read the fine print: salary sacrifice agreements must be in writing and cannot reduce your award entitlements.
• The how the index works page explains the methodology behind the Salary Index.
• For more on tax and super, visit the ATO website or speak to a financial adviser.

Salary sacrificing is a valuable tool when comparing job offers. It can turn a lower base salary into a competitive package, especially if you're in a higher tax bracket. By understanding how it works, you can make an informed decision that suits your financial goals.

FAQs

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