Salary sacrifice WA: How packaging affects your after-tax income

Salary sacrifice WA: What it means for your take-home pay

If you are an employee in Western Australia, salary sacrifice (also called salary packaging) can be a way to reduce your taxable income and potentially increase your net disposable income. The Australian Taxation Office explains that a salary sacrifice arrangement involves you and your employer agreeing for you to receive less pre-tax salary in return for benefits of similar value. This lowers your taxable income, meaning you pay less income tax and Medicare levy.

How salary sacrifice works

Under an effective arrangement, you must enter the agreement before you perform the work, have a written agreement, and not have access to the sacrificed salary. The ATO provides an example comparing three scenarios for a $65,000 annual salary in 2025–26:

• No salary sacrifice: Taxable income $65,000, net disposable income $41,912.
• Salary sacrifice without employee contributions: Taxable income $47,647, net disposable income $41,612.
• Salary sacrifice with employee contributions of $7,000: Taxable income $60,855, net disposable income $43,593.

This shows that making employee contributions can boost your take-home pay compared to not packaging or packaging without contributions. The ATO notes that from 1 April 2027, work-related items provided through salary sacrifice will no longer be FBT-exempt.

Impact on tax and Medicare levy

Your taxable income after salary sacrifice determines your income tax using the 2026–27 rates:

• Up to $18,200: Nil
• $18,201 to $45,000: 15c per $1 over $18,200
• $45,001 to $135,000: $4,020 plus 30c per $1 over $45,000
• $135,001 to $190,000: $31,020 plus 37c per $1 over $135,000
• Over $190,000: $51,370 plus 45c per $1 over $190,000

The Medicare levy is 2% of taxable income, but the low-income thresholds apply: if your taxable income is below $28,011 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 typically pay the full 2%.

Comparing to benchmarks

The national minimum wage from 1 July 2026 is $26.44 per hour and $1,004.90 per week (Fair Work Ombudsman). Full-time adult ordinary time earnings average $2,083.70 per week (ABS, May 2026). Salary sacrifice can be particularly beneficial if your salary is above these levels, as the tax savings are greater at higher marginal rates.

Super and salary sacrifice

Salary sacrificed super contributions are treated as employer contributions and are not fringe benefits if paid to a complying super fund. Your employer must still pay the super guarantee (12% from 1 July 2026) on your original salary, not the sacrificed amount. This is an important point: salary sacrifice super is additional to your compulsory super.

Considerations for WA employees

Before entering a salary sacrifice arrangement, consider:

• The type of benefits (car, super, electronic devices) and whether FBT applies.
• How employee contributions affect your net position.
• The impact on government benefits, child support, and study loan repayments.
• That you cannot claim a tax deduction for expenses your employer pays as part of the package.

For more details, see the Salary packaging guide and Take-home pay calculator. The ATO also provides a Tax withheld calculator to estimate your withholding under salary sacrifice.

Summary

Salary sacrifice WA can be a legitimate way to reduce your tax and increase your net disposable income, but it requires careful planning. The ATO advises seeking financial advice before entering an arrangement. Use the Clearance tool to estimate your after-tax salary with different packaging scenarios.

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This article uses ATO examples and 2026–27 tax rates. Individual circumstances vary.