How Salary Sacrifice Works in Australia
Salary sacrifice is a common way to reduce your taxable income by swapping part of your pre-tax salary for benefits. It is not a new salary or a separate payment—it is an agreement with your employer to receive something of value instead of cash. The amount you sacrifice is deducted from your gross pay before tax, so you pay less income tax and Medicare levy. However, the benefit you receive may be subject to Fringe Benefits Tax (FBT), which your employer may pass on to you.
What Can You Salary Sacrifice?
Common salary sacrifice items include:
- Additional superannuation contributions – These are popular because they are generally exempt from FBT and taxed at only 15% in the fund (up to the concessional cap).
- Motor vehicles – Often through a novated lease, where the lease payments and running costs are taken from pre-tax salary.
- Electronic devices – Laptops, tablets, and phones used for work.
- Childcare fees – Some employers offer salary sacrifice for childcare, but this is less common.
The benefit must be provided by your employer, and you must have a formal salary sacrifice agreement in place before the income is earned.
How Does Salary Sacrifice Affect Your Pay Compared to the National 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). This is the line used on this site. If you salary sacrifice, your taxable income drops, but your total remuneration package (salary plus benefits) may still be above or below this average. For example, if your base salary is $120,000 and you sacrifice $15,000 into super, your taxable income is $105,000—below the full-time average. But your total package (including the super contribution) is $120,000, which is above the average.
It is important to note that the ABS average is based on gross earnings before any salary sacrifice arrangements. So when comparing your pay to the national average, you should consider your pre-sacrifice salary. The site's tool accepts a yearly salary before tax, so enter your gross salary (before any sacrifice) to see where you sit relative to the line.
Tax Implications of Salary Sacrifice
Australia uses a progressive tax system. For 2026–27, the tax rates are:
- Nil on income up to $18,200
- 15% on income from $18,201 to $45,000
- 30% on income from $45,001 to $135,000
- 37% on income from $135,001 to $190,000
- 45% on income above $190,000
Plus a 2% Medicare levy (with possible reductions for low-income earners).
By reducing your taxable income through salary sacrifice, you may drop into a lower tax bracket or reduce the amount taxed at higher rates. For instance, if you earn $135,000 (the top of the 30% bracket) and sacrifice $10,000, your taxable income becomes $125,000, saving you 30% plus 2% Medicare levy on that $10,000—a tax saving of $3,200.
Salary Sacrifice and the Minimum Wage
Your salary after sacrifice cannot fall below the national minimum wage or the relevant award rate. From 1 July 2026, the national minimum wage is $26.44 per hour, $1,004.90 per week, or about $52,255 per year on a 38-hour week (Fair Work). Award minimums increased by 4.75% from that date. If your salary sacrifice would bring your cash pay below these thresholds, the arrangement is not allowed.
Medians and Averages: What Do They Mean for You?
The full-time median earnings are about $90,532 per year (ABS Employee Earnings, August 2025), which is lower than the average because high earners pull the average up. The all-employees median (including part-time and casual) is about $74,100. If you are considering salary sacrifice, remember that the median gives a better sense of what a typical worker earns. Your pre-sacrifice salary may be above or below these medians, and salary sacrifice can change your taxable income relative to them.
State Differences
Full-time average earnings vary by state. For example, the ACT has the highest average at about $119,090, while Tasmania has the lowest at about $96,008 (ABS Average Weekly Earnings, May 2026). If you live in a high-average state, your salary may need to be higher to feel on par with local peers. Salary sacrifice can help you manage tax in any state, but the benefit is the same regardless of location.
How to Set Up Salary Sacrifice
You need a written agreement with your employer before the income is earned. The agreement should specify the amount to be sacrificed and the benefit provided. Your employer will then deduct the sacrificed amount from your gross pay and either pay it into your super fund or provide the benefit. For super contributions, the money must be paid to your fund by the quarterly deadline. For other benefits, your employer may need to report them for FBT purposes.
Important Considerations
- Super caps: Concessional contributions (including salary sacrifice) are capped at $30,000 per year (2026–27). Exceeding this cap results in additional tax.
- Government benefits: Salary sacrifice reduces your adjusted taxable income, which may affect eligibility for Family Tax Benefit, Child Care Subsidy, or the Medicare Levy Surcharge.
- FBT: If the benefit is subject to FBT, your employer may pass the tax onto you, reducing the net benefit. Always ask your employer about FBT implications.
- Award and enterprise agreements: Some awards or agreements restrict salary sacrifice. Check with your employer or union.
For more details, see the Guides on salary sacrifice or How the figures are set for the sources behind the averages.
Summary
Salary sacrifice is a legitimate way to reduce your tax and boost your super or receive other benefits. It does not change your gross salary for the purpose of comparing to the national full-time average—that comparison should use your pre-sacrifice salary. The national average of $108,352 is a useful benchmark, but your personal financial situation depends on your tax bracket, the type of benefit, and your overall remuneration package. Always consult a tax professional or the ATO for advice specific to your circumstances.