What Is Salary Sacrifice?
Salary sacrifice, also known as salary packaging, is a common way to reduce your taxable income by swapping part of your pre-tax salary for benefits. These benefits can include additional superannuation contributions, a car (through a novated lease), electronic devices, or other fringe benefits. The key is that the sacrificed amount is not counted as income for tax purposes, so you pay less income tax and Medicare levy.
How Salary Sacrifice Affects Your Pay Against the National Average
The national full-time adult ordinary-time average is $108,352 a year (ABS Average Weekly Earnings, May 2026, multiplied by 52). This is the benchmark used on this site. When you salary sacrifice, your taxable income falls, which may move your reported pay closer to or below this average. However, your total remuneration (salary plus benefits) could still be above the average.
For example, if your gross salary is $120,000 and you sacrifice $15,000 into super, your taxable income becomes $105,000 — below the national average. But you still receive the $15,000 as super contributions (taxed at 15% inside the fund). Your take-home pay might be higher than if you had received the $15,000 as cash and paid 30% tax on it. The site's tool lets you place a salary on the line to see how your effective pay compares.
Tax Brackets and the Average
For the 2026–27 income year, 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. The Medicare levy is 2% (before any reductions). The national full-time average of $108,352 falls in the 30% bracket. If your salary is in the 37% or 45% bracket, salary sacrifice can save you more tax per dollar sacrificed.
Types of Salary Sacrifice
Superannuation
Salary sacrifice into super is one of the most popular options. Concessional (before-tax) contributions are taxed at 15% within the fund, up to the annual cap ($30,000 in 2026–27, including employer contributions). For someone on the 30% marginal rate, the tax saving is 15% plus 2% Medicare levy — a net benefit of 17% on the sacrificed amount. This can significantly boost your retirement savings while reducing your taxable income.
Novated Leases and Cars
A novated lease allows you to salary sacrifice a car and running costs. The car benefit may attract fringe benefits tax (FBT), but there are methods to reduce FBT, such as using the statutory formula or electing to use the operating cost method. The net benefit depends on your personal use and the car's value. It can be worthwhile if you need a new car and are on a higher tax bracket.
Other Benefits
Some employers offer salary packaging for laptops, phones, or even mortgage payments (for certain not-for-profit organisations). These benefits may be exempt from FBT or have concessional treatment. Always check with your employer and the ATO.
State Averages for Context
The national average masks differences across states. For instance, the ACT has the highest full-time average at $119,090, while Tasmania is lowest at $96,008. If you live in a state with a higher average, salary sacrifice might help you keep more of your income relative to local benchmarks. You can explore states and territories for more detail.
Is Salary Sacrifice Worth It?
The answer depends on your marginal tax rate, the type of benefit, and any caps or FBT implications. Generally, salary sacrifice is most valuable when:
- You are in the 30% tax bracket or higher.
- The benefit is exempt from FBT or has a low FBT rate (e.g., super).
- You do not exceed contribution caps or other limits.
- Your employer offers the arrangement without excessive fees.
For low-income earners, the tax savings may be small, and sacrificing into super could lock away money until retirement. It is also important to consider that salary sacrifice reduces your reported income for purposes like child support, government benefits, or loan applications. Always review your overall financial position.
How to Compare Your Pay
This site's tool accepts a yearly salary before tax and shows the equivalent weekly and hourly amounts (based on a 38-hour week) plus the distance from the national full-time average. You can use it to see where your salary after sacrifice sits. For more guidance, see the Guides section or learn how the figures are set.
Final Thoughts
Salary sacrifice can be a worthwhile strategy to reduce tax and increase your overall compensation, but it is not a one-size-fits-all solution. By understanding how it affects your taxable income relative to the national average of $108,352, you can make a more informed decision. Use the tools on this site to model your own situation.