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What Is Salary Sacrifice in Australia? How It Affects Your Job Offer Comparison
Learn what salary sacrifice in Australia means, how it impacts your take-home pay, and how to compare job offers using the Salary Index. Understand the tax and super rules.
Salary sacrifice is not a direct pay figure; it's a tax-effective arrangement that reduces your gross salary in exchange for benefits. Its effect on your index depends on the benefit type and your tax bracket.
What Is Salary Sacrifice in Australia?
Salary sacrifice is a common way to reduce your tax bill by swapping part of your pre-tax salary for a benefit your employer provides. Instead of receiving the full cash salary, you agree to have some of it directed towards things like extra superannuation, a car lease, or childcare fees. The sacrificed amount is not counted as taxable income, so you pay less income tax and Medicare levy.
When you read a job ad, the advertised gross salary is the figure before any salary sacrifice. That figure is what the [Salary Index uses to calculate your index score. For example, if the ad says $90,000 a year, your index is 83 (90,000 divided by 108,352, times 100). But if you choose to sacrifice 15,000 into super, your taxable income drops to 75,000, but your gross ordinary-time earnings for the index is still 90,000. The benefit is the tax saving and the extra super growth.
How Salary Sacrifice Affects Job Offer Comparisons
Comparing offers means looking at the total package. A job with a lower gross salary but a generous salary sacrifice option may give you more take-home pay than a higher gross salary without it. For instance, a 100,000 salary with a 15,000 super sacrifice into super could be worth more than a 110,000 salary with no sacrifice option. Use the states page to see how your state's average index – for example, NSW 101.2 – to see where a 109,658 annualised sits. But salary sacrifice doesn't change that index; it changes your tax.
Tax and Super Considerations
From 1 July 2026, the super guarantee is 12% on ordinary time earnings. If you salary sacrifice into super, your employer still pays the 12% on your original gross salary, so your total super contributions can be higher. The tax brackets for 2026–27 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. Medicare levy is 2%. By sacrificing into super, you reduce your taxable income, potentially dropping into a lower bracket. For example, if you earn 135,000 and sacrifice 10,000 into super, you avoid the 37% tax on that 10,000 and pay only 15% when you withdraw it in retirement (if you meet conditions).
Fringe Benefits Tax and Novated Leases
Some benefits, like cars, may incur fringe benefits tax (FBT). Employers can offer a novated lease where you sacrifice salary to cover car costs, but FBT may apply. The net benefit depends on your tax bracket and the car's value. Always ask your employer for a quote showing the after-tax cost.
Using the Salary Index to Compare Total Remuneration
The Salary Index helps you see where a gross salary sits against the national line. But salary sacrifice changes the composition, not the index. When comparing offers, consider the total value: gross salary plus any salary sacrifice benefits. For example, a 80,000 salary with a 10,000 car sacrifice might be worth more than a 85,000 salary without. Check the how the index works page for more on gross benchmarks. Also see pay guides for award rates and minimums.
Concrete Example
Imagine two job offers in Victoria (index 98):
- Offer A: 100,000 gross, no salary sacrifice.
- Offer B: 95,000 gross, but you can sacrifice 10,000 into super.
Offer B's taxable income is 85,000. Using tax rates, Offer A pays about 24,000 tax (plus Medicare), Offer B pays about 19,000 tax. Take-home for A is about 76,000, for B about 76,000 plus the 10,000 super (which you can't access now). So Offer B gives you more super and similar take-home. The index for A is 92, for B is 88 (based on 95,000 gross). But total remuneration is higher for B.
Conclusion
Salary sacrifice is a powerful tool to reduce tax and boost super or other benefits. When comparing job ads, look beyond the gross salary and ask about salary sacrifice options. Use the industries page to see typical pay in your field, and remember that the index is a benchmark for gross ordinary-time earnings, not your final take-home.
Questions people ask
What is salary sacrifice in Australia?
Salary sacrifice is an arrangement where you agree to give up part of your pre-tax salary in exchange for benefits provided by your employer. Common benefits include additional superannuation contributions, a car (via novated lease), childcare, or electronic devices. The sacrificed amount is not included in your taxable income, so you pay less income tax. However, your gross salary for the Salary Index (based on ordinary-time earnings) remains the same before the sacrifice.
How does salary sacrifice affect my take-home pay?
Salary sacrifice reduces your taxable income, which can lower the amount of tax withheld from your pay. For example, if you earn $90,000 and sacrifice $10,000 into super, your taxable income becomes $80,000. Using the 2026–27 tax rates, you would pay about $2,700 less in tax (ignoring Medicare). Your take-home pay increases because less tax is deducted, but your gross salary for super guarantee and other entitlements may still be based on the original $90,000. Always check your employer's policy.
Can I salary sacrifice a car or other benefits?
Yes, many employers offer salary sacrifice for cars through a novated lease, as well as for laptops, phones, or childcare. However, these benefits may be subject to fringe benefits tax (FBT), which the employer may pass on to you. The net benefit depends on your tax bracket and the type of benefit. For example, a car with a high FBT value might reduce the tax saving. Always compare the total cost and benefit before committing.