How salary sacrifice affects your pay compared to the national average
Salary sacrifice is an arrangement where you forgo part of your pre-tax salary in exchange for benefits such as a car, super contributions, or electronic devices. While it can reduce your tax bill, it also has several disadvantages that can move your taxable income below the national full-time average. Understanding these trade-offs is important when comparing your pay to the line.
The national full-time adult ordinary-time average is $2,083.70 per week, or about $108,352 per year, according to the ABS Average Weekly Earnings for May 2026. This figure is based on gross earnings before any deductions. Salary sacrifice does not change your gross earnings for this measure, but it does lower your taxable income. That means your pay packet may look smaller than the average, even if your gross salary is above it.
The national full-time average and your salary
The ABS calculates the average using ordinary-time earnings of full-time adults. It includes all pre-sacrifice salary. So if you earn $120,000 gross and sacrifice $20,000 into super, your gross for the average is still $120,000. But your taxable income drops to $100,000, which is below the full-time median of $90,532 (ABS Employee Earnings, August 2025) and below the average. This can create a misleading picture when you compare your take-home pay to the national line.
Place a salary on the line to see how your gross salary compares. But remember, the line uses gross earnings, not what you actually receive after sacrifice.
Tax implications of salary sacrifice
Salary sacrifice reduces your taxable income, potentially moving you into a lower tax bracket. For 2026–27, the 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; and 45% above $190,000. Plus the Medicare levy of 2% (before reductions).
A disadvantage is that you permanently lose access to the sacrificed income. If you sacrifice too much, you may not have enough cash to cover living expenses. Also, if your taxable income falls below the tax-free threshold, you waste the benefit of the lower brackets. For example, sacrificing $20,000 from a $120,000 salary saves tax at the 30% marginal rate, but you lose the cash now.
Other disadvantages of salary sacrifice
- Reduced borrowing capacity: Lenders assess your ability to repay loans based on your taxable income. A lower taxable income from salary sacrifice can reduce the amount you can borrow for a home or car, even if your gross salary is above the national average.
- Reduced government benefits: Many benefits, such as Family Tax Benefit or the Medicare Levy Surcharge, are based on adjusted taxable income. Salary sacrifice lowers this figure, which could reduce your eligibility or increase your out-of-pocket costs.
- Superannuation guarantee: Your employer’s compulsory super contributions are based on your ordinary-time earnings, not your sacrificed amount. However, if you sacrifice into super, you may exceed the concessional contributions cap and incur extra tax. The cap for 2026–27 is $30,000.
- Fringe benefits tax (FBT): Some salary sacrifice items, like cars, attract FBT. Your employer may pass this cost on to you, reducing the net benefit.
- Complexity: Salary sacrifice requires a formal agreement and can be difficult to reverse. Mistakes can lead to unexpected tax bills.
States and territories show how the average varies. For example, the ACT full-time average is about $119,090, while Tasmania is about $96,008. If you salary sacrifice in a high-average state, the gap between your taxable income and the state average may be even larger.
How salary sacrifice affects your position relative to medians
The full-time median is about $90,532, and the all-employees median is about $74,100 (ABS Employee Earnings, August 2025). If your gross salary is above the median but you sacrifice a significant amount, your taxable income could fall below the median. This matters for benchmarking your pay against typical workers.
Job medians and Industry medians provide more granular comparisons. For instance, if you work in an industry with a high median, salary sacrifice might push your taxable income below that industry benchmark.
The minimum wage and salary sacrifice
The national minimum wage from 1 July 2026 is $26.44 per hour, $1,004.90 per week, or about $52,255 per year on a 38-hour week. Salary sacrifice cannot reduce your cash wages below this amount. So if you earn just above the minimum, you have little room to sacrifice. Award minimums rose 4.75% from 1 July 2026, so check your award.
Guides offer more detail on how salary sacrifice interacts with awards and enterprise agreements.
Conclusion
Salary sacrifice can be a useful tax strategy, but it has clear disadvantages when comparing your pay to the national average. Your gross salary may be above the line, but your taxable income and take-home pay may fall below it. This affects borrowing, benefits, and your perception of where you stand. Always consider the full picture before entering a salary sacrifice arrangement.
How the figures are set explains the methodology behind the averages and medians used on this site. About this site provides further context on how we present salary comparisons.