Can anyone salary sacrifice? A guide to salary packaging and your take-home pay

Can anyone salary sacrifice?

If you’ve heard colleagues talk about salary packaging and wondered whether you can do it too, the short answer is: yes, most employees can salary sacrifice if their employer offers it. Salary sacrifice – also called salary packaging or total remuneration packaging – is an arrangement where you agree to receive less before-tax pay in return for your employer providing certain benefits of similar value. The Australian Taxation Office explains that this reduces your taxable income, meaning you pay less tax on your earnings.

But the key question – can anyone salary sacrifice – depends on your employer’s policies and your employment type. There is no law stopping you from salary sacrificing, but you need your employer’s agreement. The arrangement must be entered into before you do the work, be in writing, and you cannot access the sacrificed salary later. If these conditions aren’t met, the ATO treats the benefits as ordinary income and you’ll pay tax on them.

Who can and cannot salary sacrifice

• Employees – Full-time, part-time, and casual employees can salary sacrifice if their employer offers a program. Some employers restrict packaging to certain roles or benefit types.
• Contractors – Independent contractors are not employees, so they cannot salary sacrifice. They may be able to claim deductions for work expenses instead.
• Self-employed – Not eligible, as there is no employer to make the arrangement.

Even if your employer offers salary packaging, you must choose benefits that replace salary – not extras on top. For example, you could sacrifice part of your pay to have your employer pay for a car, super contributions, or work-related items. From 1 April 2027, work-related items provided through salary sacrifice will no longer be exempt from fringe benefits tax (FBT), so check with your employer before including them.

How salary sacrifice affects your take-home pay

Your take-home pay is what lands in your bank account after income tax and the Medicare levy are deducted. Salary sacrifice reduces your taxable income, so less tax is withheld. But your gross pay also drops by the sacrificed amount. The net effect can be positive if the tax savings outweigh the reduction.

The ATO provides a clear example for the 2025–26 year using an employee named Sam earning $65,000 annually. Without salary sacrifice, Sam’s net disposable income after tax, Medicare, and car expenses is $41,912. With a car salary sacrifice worth $17,353 (and no employee contribution), net disposable income is $41,611 – slightly less. But if Sam makes an employee contribution of $7,000, the taxable income is $60,855, tax and Medicare are lower, and net disposable income rises to $43,593. This shows that careful structuring can improve your after-tax position.

Tax rates and Medicare levy in 2026–27

For the 2026–27 income year, the ATO’s resident tax rates are:

• $0 – $18,200: Nil
• $18,201 – $45,000: 15c for each $1 over $18,200
• $45,001 – $135,000: $4,020 plus 30c for each $1 over $45,000
• $135,001 – $190,000: $31,020 plus 37c for each $1 over $135,000
• $190,001 and over: $51,370 plus 45c for each $1 over $190,000

Plus the Medicare levy of 2% of taxable income. If your taxable income is below $28,011 (single), you pay no Medicare levy; between $28,011 and $35,013 you pay a reduced rate (10c per $1 over the lower threshold). Full-time salaries above $35,013 pay the full 2%.

Because salary sacrifice lowers your taxable income, it can also reduce your Medicare levy and may affect other obligations like the Medicare levy surcharge or study loan repayments. The ATO warns that salary sacrifice can impact child support payments and some government benefits, so seek financial advice before entering an arrangement.

Super and salary sacrifice

Salary sacrificed super contributions are treated as employer contributions, not fringe benefits, as long as they are paid to a complying super fund. Your employer must still pay the super guarantee (12% from 1 July 2026) on your ordinary earnings as if no sacrifice occurred. The sacrificed super contributions are additional and count towards the concessional contributions cap ($30,000 per year for most people). This can be a tax-effective way to boost your retirement savings while reducing your current taxable income.

Key considerations before you start

• Employer agreement – Not all employers offer salary packaging. Check with your HR or payroll department.
• FBT – Your employer may pass on the FBT cost to you via an employee contribution. This can reduce the tax benefit.
• Reportable fringe benefits – Some benefits appear on your income statement and may affect your tax offsets or government payments.
• No double-dipping – You cannot claim a tax deduction for an expense your employer pays as part of your package.

For more details on how salary packaging works with your specific income, see our Salary packaging guide. You can also use our Take-home pay calculator to estimate your after-tax income with and without sacrifice. And remember, the ATO recommends you get professional financial advice tailored to your situation.

Bottom line

So, can anyone salary sacrifice? If you’re an employee and your employer offers it, yes. The arrangement can reduce your tax and boost your net disposable income, especially if you choose benefits that align with your spending. But it’s not automatic – you need a proper agreement and an understanding of how it affects your overall finances. Use the Tax and Medicare resources on this site to run your own numbers.