How Salary Sacrifice Works Across Australian States and Industries

What is salary sacrifice?

Salary sacrifice is a common Australian workplace arrangement where you agree to give up part of your pre-tax salary in exchange for a benefit of equal value. The most popular form is salary sacrificing into superannuation, but you can also sacrifice for a car (via novated lease), laptops, parking, or even childcare. The key advantage is that the sacrificed amount is not included in your assessable income for tax purposes, so you pay less income tax. However, some benefits attract Fringe Benefits Tax (FBT), which your employer may or may not pass on to you.

Your salary sacrifice arrangement must be documented and agreed before the income is earned. It cannot reduce your pay below the relevant minimum wage or award rate. The Salary Index uses gross ordinary-time earnings before any sacrifice, so your index position remains unchanged regardless of how much you sacrifice.

How state and industry differences affect salary sacrifice

Australia’s pay landscape varies significantly by state and industry. The national index of 100 represents full-time adult ordinary-time earnings of $108,352 per year. States like the ACT (index 109.9, annualised $119,090) and Western Australia (106.9, $115,825) sit well above the national line, while Tasmania (88.6, $96,008) and South Australia (94.6, $102,450) are below. Similarly, Mining (index 154.7) towers over Retail (75.9) and Accommodation and food services (72.5).

These differences matter for salary sacrifice because the tax saving depends on your marginal tax rate. For 2026–27, the rates are: 30% from $45,001 to $135,000, 37% from $135,001 to $190,000, and 45% above $190,000. A worker in a high-index state or industry is more likely to be in the 37% or 45% bracket. Sacrificing into super, where contributions are taxed at only 15% (within the concessional cap), can save 22 to 30 cents in tax for every dollar sacrificed. In lower-index sectors, workers may be in the 30% bracket, saving only 15 cents per dollar.

Example: Mining vs Retail

Consider a mining employee in Western Australia earning at the industry index of 154.7 – that’s about $167,600 per year. They are in the 37% tax bracket (up to $190,000). If they salary sacrifice $20,000 into super, they save $7,400 in income tax (37% of $20,000) and pay only $3,000 in contributions tax (15%), a net saving of $4,400. Plus, the super guarantee of 12% still applies to their ordinary time earnings (before sacrifice), so their super grows even more.

Now take a retail worker earning at the industry index of 75.9 – about $82,200 per year. They are in the 30% bracket. Sacrificing $20,000 into super saves $6,000 in income tax but costs $3,000 in contributions tax, a net saving of $3,000. The benefit is real but smaller. The retail worker also has less disposable income to sacrifice, and their employer may not offer salary sacrifice at all.

State differences

State indices reflect average pay, but individual jobs vary. A public servant in the ACT (index 109.9) might be on a salary of $119,000, placing them in the 37% bracket. A similar role in Tasmania (index 88.6) might pay $96,000, still in the 30% bracket. The ACT worker gets a larger tax saving from salary sacrifice. However, cost of living also differs – salary sacrifice for a car or housing may be more valuable in high-cost states.

Other considerations

Salary sacrifice can also be used for non-super benefits. For example, a novated lease on a car involves FBT, which your employer may pay or pass on. The net benefit depends on your marginal rate and the car’s running costs. Always check with your employer and a tax professional.

Your super guarantee is calculated on your ordinary time earnings, which is your gross pay before salary sacrifice. So sacrificing into super does not reduce the 12% contribution your employer must make (up to the maximum contribution base of $270,830). That’s an extra boost.

If you are on a modern award, your minimum pay cannot be reduced by salary sacrifice. The pay guides on this site show award rates, but your actual salary may be higher. Salary sacrifice is a voluntary top-up arrangement.

How the index helps you compare

The Salary Index gives you a quick way to see where your pay sits relative to the national average. If your index is above 100, you are earning more than the typical full-time worker, and salary sacrifice may offer greater tax savings. If your index is below 100, the savings are still worthwhile but smaller. Use the states and industries pages to see benchmarks for your area and sector.

Remember, salary sacrifice is a tool to manage your tax and boost your super or other benefits. It does not change your index score, but understanding your index helps you decide if sacrificing makes sense. For more on related topics, see our topics page.