Is salary sacrificing worthwhile?
If you earn a salary in Australia, you have probably heard about salary sacrificing – also called salary packaging. The idea is simple: swap some of your pre-tax pay for a benefit, such as extra superannuation, a car, or childcare. Because the sacrificed amount is not counted as assessable income, you pay less tax. But is it always a good deal? The answer depends on your income, your marginal tax rate, and what you sacrifice for.
This guide uses the national full-time average as a reference point. According to the ABS Average Weekly Earnings survey for May 2026, the average full-time adult ordinary-time earnings are $2,083.70 per week, or about $108,352 a year. That figure is the line on this site. If your salary is around that mark, you are in the 30% tax bracket for 2026–27 (income between $45,001 and $135,000). The Medicare levy of 2% applies, so your effective marginal rate is 32% (before any reductions). Salary sacrificing becomes more attractive as your marginal rate rises.
How salary sacrificing works
When you salary sacrifice, your employer reduces your gross salary by the agreed amount and provides a benefit instead. The sacrificed amount is not subject to PAYG withholding, so your taxable income drops. The benefit may be exempt from fringe benefits tax (FBT) or subject to it. Common FBT-exempt benefits include superannuation above the compulsory guarantee, portable electronic devices used mainly for work, and certain childcare. A novated car lease is a popular option, but it attracts FBT unless you use the car mainly for work or elect the statutory method.
The ABS explains that its average weekly earnings figures exclude amounts salary sacrificed, but the cash earnings series includes them. That means your official average weekly earnings might understate your total compensation if you salary sacrifice. For example, if you earn $108,352 and sacrifice $10,000 into super, your reported earnings would be $98,352, but your total package is still $108,352.
When is salary sacrificing worthwhile?
High marginal tax rates
The higher your marginal rate, the more tax you save. For someone on the 37% bracket ($135,001 to $190,000), sacrificing $10,000 saves $3,700 in tax plus $200 Medicare levy, a total of $3,900. For someone on the 45% bracket (over $190,000), the saving is $4,700. The national full-time average of $108,352 sits in the 30% bracket, so the saving is $3,000 plus $200 Medicare levy = $3,200. That is still significant.
Superannuation
Salary sacrificing into super is almost always worthwhile if you can afford the reduction in take-home pay. Super contributions are taxed at 15% within the fund, compared to your marginal rate of up to 45%. The concessional contributions cap for 2026–27 is $30,000. If you earn the average and sacrifice $10,000, you save $3,200 in tax and Medicare, and the $10,000 grows in super taxed at 15% ($1,500), leaving $8,500 invested. Without sacrificing, you would have paid $3,200 tax and had $6,800 to invest after tax. The difference is $1,700 in your favour, plus the compounding growth.
Novated leases and other benefits
A novated lease can be worthwhile if you need a car and your employer offers it. The lease payments come from pre-tax salary, reducing your taxable income. However, FBT may apply, and the savings depend on your mileage and the car's cost. Use a reputable calculator or consult a salary packaging provider. For someone on the average salary, a novated lease can save a few thousand dollars a year if structured correctly.
When salary sacrificing may not be worthwhile
Low income
If your taxable income is below $18,200, you pay no income tax, so salary sacrificing offers no tax benefit. You would simply reduce your cash flow for no gain. The national minimum wage from 1 July 2026 is $26.44 per hour, or about $52,255 a year on a 38-hour week. That is well above the tax-free threshold, so even minimum wage earners can benefit from sacrificing into super, though the savings are smaller (15% marginal rate plus 2% Medicare = 17% saving).
Cash flow needs
Salary sacrificing reduces your take-home pay. If you need cash for rent, bills, or emergencies, sacrificing too much can strain your budget. The all-employees median weekly total earnings are about $1,579.40 (ABS May 2026), which annualises to roughly $82,129. That is below the full-time average. If your salary is at that level, sacrificing $5,000 into super might save $850 in tax, but your take-home pay drops by $4,150. Ensure you have enough liquidity.
Caps and limits
Super concessional contributions are capped at $30,000. Exceeding the cap incurs additional tax. Also, some benefits have FBT that can erode savings. Always check the rules with your employer or a tax professional.
How your salary compares
To see where your pay sits against the national full-time average, Place a salary on the line. The line is $108,352. If you earn more, you are above average; if less, below. The full-time median is about $90,532 (ABS Employee Earnings, August 2025), so half of full-time workers earn less than that. The all-employees median is about $74,100. State averages vary: New South Wales $109,658, Victoria $106,137, Queensland $106,064, South Australia $102,450, Western Australia $115,825, Tasmania $96,008, Northern Territory $103,173, and the Australian Capital Territory $119,090. States and territories has more detail.
Tax and take-home pay
For 2026–27, the 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% (reductions may apply for low incomes). If you earn the average $108,352, your tax before Medicare is about $24,105 (calculated as $5,092 + 0.30 × ($108,352 – $45,000) = $5,092 + $19,005.60 = $24,097.60, rounding). Add Medicare of $2,167, total tax about $26,265. Take-home pay is about $82,087. If you salary sacrifice $10,000 into super, taxable income becomes $98,352, tax drops to about $21,005 (plus Medicare $1,967), total $22,972. Take-home pay becomes $75,380, but you have $10,000 in super. Your total compensation is $85,380, which is $3,293 more than without sacrificing. That is the benefit.
Final thoughts
Salary sacrificing is a legitimate way to reduce tax and boost your savings or get a benefit you need. It is most worthwhile if you are on a moderate to high income, have a clear goal (like retirement savings), and can manage the reduced cash flow. For low-income earners or those with tight budgets, the benefits are smaller. Always consider the type of benefit, FBT implications, and your personal circumstances. The ABS data shows that average weekly earnings have grown 3.7% annually to May 2026, so wages are rising, but tax brackets are not indexed, meaning more people will drift into higher brackets and benefit more from sacrificing. How the figures are set explains the methodology behind the averages.
If you are unsure, speak to a financial adviser or use the tools on this site to see how your salary compares. The key is to make an informed decision based on your own numbers.