How much can you salary sacrifice and increase your take-home pay?
Your take-home pay depends on your salary sacrifice arrangement, tax bracket, and Medicare levy; there is no single figure.
Understanding your taxable income and take-home pay
Your take-home pay is what lands in your bank account after your employer withholds income tax and the Medicare levy. For the 2026–27 income year, the Australian Taxation Office applies these resident tax rates:
| Taxable income | Tax on this income |
|---|---|
| $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 |
These rates do not include the 2% Medicare levy. Most full-time employees pay the full 2% because their income exceeds the single upper threshold of $35,013 (the lower threshold is $28,011). The Medicare levy is calculated on your taxable income, so reducing that income can lower your levy bill. For more detail, see the resident tax table.
How salary sacrificing reduces your taxable income
Salary sacrificing (also called salary packaging) is an agreement with your employer to forgo part of your pre-tax salary in exchange for benefits of similar value. Because the sacrificed amount is not included in your taxable income, you pay less income tax and Medicare levy. The ATO explains that there is no restriction on the types of benefits you can include, but your employer may have to pay fringe benefits tax (FBT) on some benefits. Common examples include cars, electronic devices, and additional super contributions.
A key point: salary-sacrificed super contributions are treated as employer contributions and are not subject to FBT. They are additional to your super guarantee. Your employer must still pay the 12% super guarantee on your full ordinary time earnings (up to the maximum contribution base of $270,830).
How much can you salary sacrifice?
The question of how much can you salary sacrifice depends on your employer's policy and the type of benefit. There is no legislated dollar limit for most salary-sacrifice benefits, but the FBT rules effectively cap the value of tax-free benefits. For example, the ATO's example shows that for a car fringe benefit, the taxable value is grossed up by 1.8868, and the employer may ask you to make an employee contribution to reduce their FBT liability. From 1 April 2027, work-related items such as laptops and phones will no longer be exempt from FBT when provided through salary sacrifice.
For super, the concessional contributions cap (including employer guarantee and salary sacrifice) is $30,000 per year for 2026–27. Exceeding this cap incurs additional tax.
Calculating your after-tax salary with salary sacrifice
To estimate your take-home pay, start with your gross salary, subtract the amount you sacrifice, then apply the tax rates and Medicare levy. The income tax calculator can help, but it does not account for salary sacrifice directly. You can manually enter your reduced taxable income.
For example, if you earn $65,000 and sacrifice $17,353 for a car (as in the ATO's scenario), your taxable income drops to $47,647. Using 2025–26 rates (since the example predates 2026–27), the tax would be $5,082.10 plus Medicare of $952.94, leaving $41,611.96 after tax and sacrifice. With employee contributions, your net disposable income can be higher. The ATO's salary sacrificing page provides a detailed comparison.
Remember that salary sacrifice can affect other obligations like the Medicare levy surcharge, study loan repayments, and some government benefits. Always run the numbers with your specific situation.
Using our tools to plan your take-home pay
Our Take-home pay guide walks you through the calculation step by step. You can also explore Salary packaging for sector-specific rules, and Super to understand contribution caps. For a quick estimate, use the Clearance tool to see how different sacrifice amounts change your net pay.
Key benchmarks for 2026–27
- National minimum wage: $26.44 per hour, $1,004.90 per week (Fair Work Ombudsman).
- All employees average weekly total earnings: $1,579.20 (ABS, May 2026).
- Full-time adult ordinary time earnings: $2,083.70 per week.
- Medicare single thresholds: $28,011 (lower) and $35,013 (upper).
These figures help you gauge where you sit. If your salary is around the average, salary sacrificing a few thousand dollars could drop you into a lower tax bracket, saving you 15c or 30c per dollar sacrificed.
Final thoughts
Salary sacrificing is a legitimate way to reduce your tax bill and increase your take-home pay, but it requires careful planning. The ATO provides clear rules, and your employer can advise on what benefits they offer. Always consider the impact on your super, Medicare levy surcharge, and any government entitlements. Use our Benchmarks page to compare your pay, and consult a tax professional for personalised advice.
Questions
Does salary sacrificing affect my super guarantee?
No. Your employer must still pay the super guarantee (12% from 1 July 2026) on your full ordinary earnings, as if you had not sacrificed any salary. Salary-sacrificed super contributions are additional employer contributions and count towards the concessional cap.
Can I salary sacrifice my mortgage or rent?
Generally no for most employees. Mortgage and rent payments are not fringe benefits and cannot be salary sacrificed unless you work in certain non-profit or public health sectors under specific packaging arrangements. Check with your employer.
What is the Medicare levy surcharge and how does salary sacrifice affect it?
The Medicare levy surcharge (1%–1.5%) applies if you earn above a threshold and do not have appropriate private hospital cover. Salary sacrifice reduces your taxable income, which may lower your income for surcharge purposes, but the reportable fringe benefits amount from your salary sacrifice can push you back over the threshold. Use the ATO's calculator or our Tax and Medicare guide.