What is salary sacrifice?
Salary sacrifice is an arrangement between you and your employer where you agree to forgo part of your pre-tax salary in exchange for benefits of a similar value. Common examples include additional superannuation contributions, a car through a novated lease, or electronic devices. The sacrificed amount is deducted from your gross pay before tax is calculated, reducing your taxable income. This can lower the amount of income tax you pay, but it does not change the gross salary figure that appears on your payslip or that is reported to the Australian Tax Office (ATO) as your total remuneration.
How salary sacrifice affects your taxable income
When you salary sacrifice, your employer reports your gross salary as the amount before the sacrifice. However, your taxable income is reduced by the sacrificed amount. For the 2026–27 financial year, the ATO 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 of 2% applies on top, with reductions for low-income earners. By reducing your taxable income through salary sacrifice, you may move into a lower tax bracket or reduce the amount taxed at higher rates. For example, if your gross salary is $108,352 (the national full-time average), sacrificing $10,000 into super would reduce your taxable income to $98,352, saving you $3,000 in tax (30% of $10,000) plus the 2% Medicare levy.
Salary sacrifice and the national average
The national full-time average, as measured by the ABS Average Weekly Earnings for May 2026, is $2,083.70 per week or $108,352 per year (multiplied by 52). This figure represents ordinary-time earnings for full-time adult employees before any salary sacrifice. Your gross salary is what is compared to this line. Salary sacrifice does not alter that gross figure; it only changes how much tax you pay. Therefore, if your gross salary is $108,352, you sit exactly on the line regardless of any sacrifice arrangement. However, your net take-home pay after tax and sacrifice will be lower than someone with the same gross salary who does not sacrifice, because the sacrificed amount is redirected to a benefit rather than cash.
Common salary sacrifice items
In Australia, the most popular salary sacrifice benefits include:
- Additional superannuation: Contributions above the compulsory Super Guarantee (11.5% from 1 July 2026) can be made via salary sacrifice, up to the concessional cap ($30,000 for 2026–27). These are taxed at 15% in the fund, which is often lower than your marginal rate.
- Novated car lease: A lease on a vehicle where payments are made from pre-tax salary. The lease includes running costs, and the residual value is paid at the end.
- Electronic devices: Laptops, tablets, and phones used for work can be salary sacrificed under a salary packaging arrangement, often with Fringe Benefits Tax (FBT) exemptions.
- Childcare fees: Some employers offer salary sacrifice for childcare, reducing taxable income.
Each benefit has specific FBT rules. The ATO provides guidance on what is allowable. Your employer must have a valid salary sacrifice agreement in place.
Tax considerations and the minimum wage
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. Award minimums rose by 4.75% from that date. For someone on the minimum wage, salary sacrifice is less common because the tax benefit is smaller (lower marginal rate) and the sacrificed amount may push taxable income below the tax-free threshold. The full-time median salary is $90,532, and the all-employees median is $74,100 (ABS Employee Earnings, August 2025). These medians are also gross figures unaffected by sacrifice.
State and territory averages
If you are comparing your salary to state averages, note that these are also gross figures. For example, the full-time average in New South Wales is about $109,658, in Victoria $106,137, in Queensland $106,064, in South Australia $102,450, in Western Australia $115,825, in Tasmania $96,008, in the Northern Territory $103,173, and in the Australian Capital Territory $119,090. Salary sacrifice does not change these benchmarks.
How the line works
The line on this site uses the national full-time average from the ABS. You can place a salary on the line to see how your gross pay compares. The tool shows your weekly and hourly equivalent on a 38-hour week, plus the distance from the average. Because salary sacrifice does not affect your gross salary, your position on the line remains the same regardless of any sacrifice arrangement. For more detail on how the figures are set, see How the figures are set.
Summary
Salary sacrifice is a tax-effective way to receive benefits, but it does not move your gross salary above or below the national average. Your gross pay is what is measured against the line. The key takeaway is that while salary sacrifice can reduce your tax bill and increase your net worth through super or other benefits, it does not change the headline figure that determines where you sit relative to the average full-time worker in Australia.