How Salary Sacrifice Works
Salary sacrifice lets you redirect part of your pre-tax salary toward specific benefits. Because the money comes from your pre-tax income, you reduce your taxable income and pay less tax. Common salary sacrifice items include extra super contributions, novated car leases, and laptops. For someone earning $100,000, sacrificing $10,000 into super saves approximately $2,250 in tax compared to taking the same amount as salary.
Super Salary Sacrifice
The most popular option. You can contribute up to $30,000 total per year to super (including employer contributions) at the concessional 15% tax rate instead of your marginal rate. For someone in the 37% tax bracket, each $1,000 sacrificed saves $220 in tax. The catch: you can't access this money until retirement (currently age 60). Best for long-term wealth building.
Novated Lease
A novated lease lets you pay for a car (purchase price, fuel, insurance, maintenance, registration) from your pre-tax salary. Savings of $3,000-8,000/year depending on income and car value. Works best for people earning $80,000+ buying a car worth $30,000-60,000. Electric vehicles get extra benefits — no FBT on EVs under $91,387 (luxury car threshold), making EV novated leases extremely attractive.
NFP and Hospital Employees
If you work for a not-for-profit or public hospital, you get additional salary sacrifice benefits. Up to $15,900 of general living expenses (rent, mortgage, groceries, bills) can be salary sacrificed tax-free, plus $2,650 for meals and entertainment. This is an enormous tax benefit — essentially $15,900 of tax-free income on top of the standard tax-free threshold. Many Chinese Australians working in aged care and hospitals miss this benefit.
Getting Started
Ask your HR or payroll department about salary sacrifice arrangements. Most employers support super salary sacrifice — it costs them nothing. Novated leases require employer agreement (most large employers offer them). Consider consulting a financial adviser for amounts over $10,000/year to optimise your tax position. Review your arrangement annually as tax brackets and super caps change.