How salary sacrifice health insurance works
Salary sacrifice health insurance is an arrangement where you forgo part of your pre-tax salary in exchange for your employer paying your health insurance premiums. This reduces your taxable income, which can lower the tax you pay. The ATO allows this under certain conditions, typically for private hospital cover. The amount sacrificed is deducted from your gross salary before tax is calculated, so your reported taxable income is lower than your total remuneration package.
Impact on your reported salary
When you salary sacrifice health insurance, the salary figure you see on your payslip (and report to the ATO) is your gross salary minus the sacrificed amount. For example, if your gross salary is $120,000 and you sacrifice $5,000 for health insurance, your taxable income becomes $115,000. This means your personal salary for comparison against the national full-time average of $108,352 (ABS Average Weekly Earnings, May 2026) may be higher or lower depending on your total package. The national average is based on gross ordinary-time earnings before any salary sacrifice, so your figure may not directly align.
State variations
State full-time averages differ significantly, as shown in the on-site notes: 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 Australian Capital Territory $119,090. If you work in a state with a higher average, such as Western Australia or the ACT, you are more likely to be in a higher tax bracket (e.g., 30% or 37% for 2026–27), making salary sacrifice more valuable. In lower-average states like Tasmania, the tax saving is smaller. The States and territories page provides more detail on how location affects your pay relative to the national line.
Award considerations
Your award or enterprise agreement may affect your ability to salary sacrifice health insurance. Fair Work sets minimum wages and conditions, and salary sacrifice must not reduce your base rate of pay below the applicable minimum. 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. Some awards explicitly allow salary packaging for certain employees, while others restrict it. Always check your award or agreement before entering a salary sacrifice arrangement.
Comparing to the national average
The ABS full-time average
The national full-time adult ordinary-time average is $2,083.70 per week, or about $108,352 per year (ABS Average Weekly Earnings, May 2026, multiplied by 52). This is the line on this site. If you salary sacrifice health insurance, your taxable salary may be lower than this average, but your total remuneration (including the benefit) could be higher. The ABS figure does not adjust for salary sacrifice, so it is a gross benchmark.
Medians and minimum wage
The full-time median is about $90,532, and the all-employees median is about $74,100 (ABS Employee Earnings, August 2025). These medians are also based on gross earnings. If your salary after sacrifice falls below these medians, you may be earning less than half of full-time workers. The minimum wage is a floor: your base rate must be at least $26.44 per hour, even after salary sacrifice. You cannot sacrifice so much that your hourly rate drops below the minimum.
Why your figure may differ
Your personal salary after salary sacrifice health insurance can differ from the national average for several reasons:
- State: As noted, state averages vary by up to $23,000 between Tasmania and the ACT.
- Award or agreement: Some industries have higher minimum rates or specific salary packaging rules.
- Tax bracket: The tax saving from salary sacrifice depends on your marginal tax rate. For 2026–27, rates are nil up to $18,200, 15% to $45,000, 30% to $135,000, 37% to $190,000, and 45% above that, plus the 2% Medicare levy. Higher earners benefit more.
- Employer policy: Not all employers offer salary sacrifice for health insurance, and some cap the amount.
To see where your salary sits against the national line, use the Place a salary on the line tool. It accepts a yearly salary before tax and shows the weekly and hourly equivalents on a 38-hour week, plus the distance from the full-time average. Remember that if you salary sacrifice, enter your gross salary before the sacrifice for an accurate comparison.
Summary
Salary sacrifice health insurance can reduce your taxable income, making your reported salary lower than the national full-time average of $108,352. However, your total remuneration may be competitive. State and award differences play a key role in how much you can save and how your pay compares. Always consult your award or agreement and consider your tax bracket before deciding.