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What Costs Can An Employee Salary Sacrifice?

When negotiating remuneration with your employer, it’s easy to become fixated on a magic number. However, this might result in a standstill if your employer cannot comply with your demand. If you’re not prepared to leave, it’s worth considering a salary sacrifice arrangement. Read on to find out what benefits you can obtain in place of your magic number.

What is a salary sacrifice arrangement?

A salary sacrifice arrangement (also termed ‘salary packaging’) is when an employee’s remuneration comprises of both income and benefits. The benefits that are available to an employee varies from employer to employer.

Once you and your employer have settled the terms of the salary sacrifice arrangement, ensure that you have this documented in writing. You may run into difficulties down the line if you are relying solely on a verbal arrangement.

To give you an idea of what a salary sacrifice arrangement might look like, imagine you have a salary equating to $80,000. That $80,000 will comprise of:

  • $65,000 as income;
  • $10,000 as use of a work car; and
  • $5,000 as childcare reimbursement.

Why consider a salary sacrifice arrangement?

There are many reasons why you should consider a salary sacrifice arrangement. Firstly, a salary sacrifice arrangement reduces your taxable income and increases your take-home pay. Secondly, it can provide access to benefits that may have otherwise been out of reach. Thirdly, it allows you to stay with the company without taking on additional financial hardship.

What costs can an employee salary sacrifice?

Benefits generally fall into one of three categories: fringe benefits, exempt benefits, and super.

Fringe Benefits

A fringe benefit is a form of compensation that is not cash-based. They are often used by employers to remain competitive, be it attracting new employees or retaining existing employees.

Common fringe benefits offered include:

  • Health insurance
  • Subsidised gym/health memberships
  • Personal use of a company car
  • Reimbursement for school fees or childcare fees
  • A living-away-from-home allowance (LAFHA)

The tax on the fringe benefits will be paid by your employer, not you. 

Exempt Benefits

Exempt benefits are benefits that are exempt from Fringe Benefits Tax (FBT). Benefits that fall under this category are generally work-related items such as mobile phones, laptops, and protective clothing. It also covers taxi travel, minor benefits (less than $300 in value), and car park benefits.


An employer could put some of your pre-tax income into your super account (‘concessional contributions’). Concessional contributions will be taxed at 15% and this is generally lower than your marginal tax rate. 

Note that the total of your employer, salary sacrificed and personal contributions cannot exceed $25,00 per financial year.  


Knowing your worth is important when entering into any remuneration negotiation. However, that doesn’t been you have to play hardball. Being open to compromising on your salary and accepting benefits may be worth your while. 

Consider what your financial situation and what expenses you have. Then see what your employer has to offer. You’ll find that many employers have established relationships with reputable companies across a range of categories. These relationships can help to ensure that you retain your quality of life when taking a pay cut. 

If you have any questions regarding a potential salary sacrifice arrangement, reach out to an employment lawyer.  

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