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Remote Area Housing Salary Sacrifice: How It Affects Your Pay Index
Learn how remote area housing salary sacrifice interacts with state and industry pay indices. See examples from mining, retail, and more.
The effect of remote area housing salary sacrifice on your pay index depends on your industry and state; the index itself is based on gross ordinary-time earnings before sacrifice.
Remote Area Housing Salary Sacrifice Explained
Remote area housing salary sacrifice is an arrangement where an employee in a designated remote location agrees to forgo part of their pre-tax salary in exchange for housing provided by their employer. This reduces the employee's taxable income, potentially lowering their tax bill and increasing take-home pay. The Australian Tax Office (ATO) sets rules for these arrangements under fringe benefits tax (FBT) law, and employers often use them to attract staff to hard-to-fill roles in remote areas.
How It Relates to the Salary Index
The Salary Index measures gross full-time adult ordinary-time earnings, with 100 equal to $108,352 per year (based on ABS Average Weekly Earnings, May 2026). Your index is your annual gross salary divided by this benchmark, multiplied by 100. Salary sacrifice does not change your gross salary for index purposes—it only redirects part of it. For example, if you earn $150,000 gross and sacrifice $30,000 for housing, your index is still 138.4 (150,000 / 108,352 × 100). The sacrifice reduces your taxable income to $120,000, but the index reflects the full $150,000.
State Differences in Pay and Sacrifice Potential
State indices vary widely, affecting how much you can benefit from salary sacrifice. In Western Australia (index 106.9, annualised $115,825), mining and resources jobs often pay well above the national line, making salary sacrifice a common perk. A worker on $130,000 in WA could sacrifice $20,000 for housing, dropping taxable income to $110,000—still above the national average. In contrast, Tasmania (index 88.6, $96,008) has lower average pay, so a worker on $90,000 might sacrifice only $10,000, leaving $80,000 taxable. The tax saving is smaller because the marginal rate is lower. See the states page for more details.
Industry Variations
Industry indices also matter. Mining (index 154.7) has the highest average pay, so workers can sacrifice larger amounts while still having a high index. A miner on $180,000 could sacrifice $40,000 for housing, reducing taxable income to $140,000—still well above the national line. In retail trade (index 75.9), average pay is much lower. A retail manager on $80,000 might sacrifice only $10,000, leaving $70,000 taxable. The benefit is smaller, and many retail jobs are in urban areas where remote area rules don't apply. Check the industries page for comparisons.
Tax and Super Considerations
Salary sacrifice reduces your taxable income, so you pay less income tax and Medicare levy. For 2026–27, resident tax rates are: nil up to $18,200, 15% to $45,000, 30% to $135,000, 37% to $190,000, and 45% above. Medicare is 2%. If you sacrifice $20,000 from a $130,000 salary, you save tax at the 30% marginal rate (plus Medicare), meaning about $6,400 less tax. However, super guarantee (12% from 1 July 2026) is calculated on your ordinary-time earnings, which may include the sacrificed amount depending on your award or agreement. Always check with your employer.
Example: Mining Worker in Remote WA
Consider a mining technician in Western Australia earning $140,000 gross. The state index is 106.9, and the mining industry index is 154.7. They salary sacrifice $25,000 for housing. Their gross index remains 129.2 (140,000 / 108,352 × 100). Taxable income becomes $115,000. Tax (excluding Medicare) is roughly $28,575 (based on 2026–27 rates). Without sacrifice, tax on $140,000 would be about $36,075—a saving of $7,500. Their take-home pay (after tax and Medicare) increases by that amount, making the arrangement attractive. See the Salary Index for more on how indices work.
Example: Retail Worker in Tasmania
A retail store manager in Tasmania earns $75,000 gross. The state index is 88.6, and retail industry index is 75.9. They might sacrifice $10,000 for housing if eligible. Gross index is 69.2. Taxable income becomes $65,000. Tax saving is at the 30% marginal rate (plus Medicare), about $3,200. The benefit is smaller, and many retail roles are not in remote areas. Always confirm eligibility with your employer.
Key Caveats
Not all remote workers qualify for housing salary sacrifice. The ATO defines remote areas based on location and employer policy. The arrangement must be part of a formal salary packaging agreement. Also, the index figures are benchmarks, not individual pay quotes. For personalised advice, consult a tax professional. Learn more about pay guides and topics related to salary packaging.
Questions people ask
Does remote area housing salary sacrifice affect my salary index?
No, the salary index is calculated from your gross ordinary-time earnings before any salary sacrifice. For example, if your gross annual salary is $120,000 and you sacrifice $20,000 for housing, your index is still 110.8 (120,000 / 108,352 × 100). The sacrifice only reduces your taxable income, not the earnings used for the index.
Which industries commonly offer remote area housing salary sacrifice?
Mining, construction, and health care in remote locations often provide this benefit. For instance, a mining worker in Western Australia (state index 106.9) might sacrifice part of their salary for company-provided housing. In contrast, retail or hospitality workers (industry indices 75.9 and 72.5) are less likely to have such arrangements due to lower pay and urban locations.
How does state location affect the benefit of remote area housing salary sacrifice?
States with higher pay indices, like WA (106.9) and ACT (109.9), offer more scope for salary sacrifice because the base salary is higher. In lower-index states like Tasmania (88.6), the same sacrifice might leave less cash for living expenses. However, the tax saving is proportional to your marginal tax rate, so higher-income workers benefit more regardless of state.