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Australia Salary Sacrifice Guide

Australian salary sacrifice arrangements. The guide covers: the salary sacrifice into the superannuation — the 'salary sacrifice' is the 'arrangement' under which the 'employee' agrees to 'forego' the 'part of the salary' (the 'pre-tax salary') in exchange for the 'benefits' provided by the 'employer'; the 'salary sacrifice into the superannuation' is the 'concessional contribution' — the 'employer' contributes the 'salary-sacrificed amount' to the 'superannuation fund' as the 'employer contribution'; the 'salary-sacrificed super contributions' are subject to the 'concessional contributions cap' of $30,000 (from the 1 July 2025, the 'concessional cap' is $30,000 per year under the 'indexation'); the 'salary-sacrificed super contributions' are taxed at 15% in the 'superannuation fund' (the 'contributions tax') and are NOT subject to the 'PAYG withholding' or the 'Medicare levy'; the novated car lease — the 'novated lease' is the 'three-way arrangement' between the 'employee', the 'employer', and the 'financier' (the 'car lease company'); the 'employee' 'sacrifices' the 'part of the salary' to pay for the 'car lease' and the 'car operating costs' (the 'fuel', the 'maintenance', the 'insurance', the 'registration'); the 'novated lease' is the 'car fringe benefit' and is subject to the 'FBT' (the 'fringe benefits tax') at the rate of 47%; the 'FBT' on the 'car benefit' is calculated using the 'statutory formula method' (the 'statutory percentage' of 20% of the 'car base value') or the 'operating cost method' (the 'logbook method'); the 'FBT liability' may be 'passed on' to the 'employee' through the 'post-tax contribution' (the 'employee contribution' to reduce the 'FBT'); the reportable fringe benefits — the 'reportable fringe benefits amount (the 'RFBA')' is the 'grossed-up value' of the 'fringe benefits' provided by the 'employer' to the 'employee'; the 'RFBA' is 'reported' on the 'employee's payment summary' (the 'income statement') and is used for the 'means testing' of the 'government benefits' (the 'Medicare levy surcharge', the 'private health insurance rebate', the 'family tax benefit', the 'child care subsidy'); the other salary sacrifice benefits — the 'salary sacrifice' can also be used for: (i) the 'electronic devices' (the 'laptops', the 'tablets', the 'smartphones') — the 'portable electronic devices' may be 'exempt from the FBT' if the 'predominant use is for the work purposes' (the 'otherwise deductible rule'); (ii) the 'health insurance' (the 'private health insurance' is 'exempt from the FBT' if the 'premiums are paid by the employer for the employee'); (iii) the 'child care' (the 'child care fees' and the 'school fees' are the 'fringe benefits' subject to the 'FBT'); the salary sacrifice and the super guarantee — the 'salary sacrifice contributions' do NOT reduce the 'employer's super guarantee obligation' (the 'SG at 11.5%' is calculated on the 'employee's ordinary time earnings (the 'OTE')' — the 'OTE' is the 'salary' BEFORE the 'salary sacrifice' deduction).

Super Salary Sacrifice

  • Concessional contributions cap: The 'salary sacrifice' super contributions count toward the 'concessional contributions cap' of $30,000 per year (from 1 July 2025). The 'concessional cap' also includes the 'employer SG contributions' (the '11.5% SG contributions').
  • Contributions tax: The 'salary-sacrificed super contributions' are taxed at 15% in the 'superannuation fund'. The 'contributions tax' is deducted from the 'contribution' by the 'super fund'.
  • PAYG saving: The 'salary-sacrificed amount' is NOT subject to the 'PAYG withholding', the 'Medicare levy' (2%), or the 'MLS' (if applicable). The 'employee' saves the 'marginal tax rate' on the 'sacrificed amount'.

For the super guarantee and the employer contributions, see our Superannuation Employer Guide →.

Novated Lease & FBT

  • Statutory formula method: The 'FBT on the car benefit' is calculated as 20% of the 'car base value' × the 'number of days of the FBT year' / 365 × the 'FBT rate' (47%).
  • Employee contribution: The 'employee' can make the 'post-tax contribution' (the 'employee contribution') to 'reduce the FBT'. The 'employee contribution' reduces the 'taxable value' of the 'car benefit'.
  • GST on novated lease: The 'novated lease payments' include the 'GST' — the 'employer' can claim the 'input tax credits' on the 'lease payments' and the 'operating costs'.

For the FBT exemptions and the otherwise deductible rule, see our Fringe Benefits Tax Guide →.

Reportable Fringe Benefits

  • RFBA reporting: The 'reportable fringe benefits amount (RFBA)' is the 'grossed-up value' of the 'fringe benefits' provided by the 'employer'. The 'RFBA' is reported on the 'income statement' (the 'payment summary').
  • Means testing impact: The 'RFBA' is used for the 'means testing' of the 'Medicare levy surcharge', the 'private health insurance rebate', the 'family tax benefit', and the 'child care subsidy'.

For the Medicare levy surcharge and the private health insurance, see our Personal Tax Guide →.