What is salary sacrifice and how it affects your take-home pay in Australia
Your take-home pay depends on your taxable income, tax brackets, and Medicare levy; salary sacrifice can reduce taxable income but specific amounts vary.
How your take-home pay is calculated
When you receive a salary in Australia, the amount that lands in your bank account is your take-home pay after income tax and the Medicare levy. Understanding how these deductions work helps you plan your budget and evaluate job offers. This guide explains the key components using the latest published rates for the 2026–27 tax year.
Income tax brackets and offsets
The Australian Taxation Office applies a progressive tax system. For residents, the first $18,200 of taxable income is tax-free. Above that, you pay:
- 15c per $1 from $18,201 to $45,000
- $4,020 plus 30c per $1 from $45,001 to $135,000
- $31,020 plus 37c per $1 from $135,001 to $190,000
- $51,370 plus 45c per $1 over $190,000
You may also be eligible for the Low Income Tax Offset (LITO). It provides a maximum of $700 at taxable incomes up to $37,500, then reduces by 5c per $1 until $45,000, after which it becomes $325 minus 1.5c per $1 until $66,667. LITO can only reduce your tax to zero; it cannot create a refund.
Medicare levy
The Medicare levy is 2% of your taxable income, used to fund Australia’s public health system. However, if you are single and your taxable income is below $28,011, you pay no levy. Between $28,011 and $35,013, you pay 10c per $1 over the lower threshold. Above $35,013, the full 2% applies. These are the latest published single-person thresholds. Full-time salaries almost always exceed $35,013, so you will pay the full 2%.
Superannuation
From 1 July 2026, the super guarantee rate is 12% of your ordinary time earnings, up to a maximum contribution base of $270,830. Many job advertisements state a salary “plus super”, meaning the employer contributes super on top of your base pay. In that case, super is not deducted from your take-home pay. If a salary is advertised as “including super”, the employer’s contributions are part of the total package, which can reduce your cash salary.
What is salary sacrifice?
You might have heard the term “what is salary sacrifice” when looking at ways to boost your super or reduce tax. Salary sacrifice is an agreement with your employer to exchange part of your pre-tax salary for benefits such as additional super contributions, a car, or other items. Because the sacrificed amount is not included in your taxable income, you pay less income tax and Medicare levy. However, the benefit may be subject to fringe benefits tax (FBT) depending on the type. Salary sacrifice is a common strategy for employees who want to increase their retirement savings or access certain perks. The exact impact on your take-home pay depends on your marginal tax rate and the rules of the arrangement. For more details, see our guide on Salary packaging.
Putting it all together: an example
Let’s say you earn the national minimum wage. Fair Work Ombudsman sets this at $26.44 per hour and $1,004.90 per week, which rounds to $52,255 annually. As a resident, your taxable income is $52,255. Using the tax brackets:
- Tax on first $18,200: $0
- Tax on next $26,800 ($18,201 to $45,000): 15c × $26,800 = $4,020
- Tax on remaining $7,255 ($45,001 to $52,255): 30c × $7,255 = $2,176.50
- Gross tax: $4,020 + $2,176.50 = $6,196.50
LITO: At $52,255, LITO is $325 minus 1.5c per $1 over $45,000. Over $45,000 by $7,255, so reduction = 1.5c × 7,255 = $108.825, so LITO = $325 – $108.825 = $216.175 (rounded to $216).
Tax after LITO: $6,196.50 – $216 = $5,980.50
Medicare levy: 2% of $52,255 = $1,045.10
Total deductions: $5,980.50 + $1,045.10 = $7,025.60
Take-home pay: $52,255 – $7,025.60 = $45,229.40 per year, or about $1,739.59 per fortnight.
This is a simplified estimate. It excludes HELP/HECS repayments, the Medicare levy surcharge, salary sacrifice, and payroll tax-table rounding. Use our Take-home pay calculator for a more personalised figure.
Other benchmarks
The Australian Bureau of Statistics reports average weekly earnings. For all employees (including part-time), the average weekly total earnings is $1,579.20, which rounds to $82,118 annually. For full-time adult ordinary time earnings (excluding overtime and employer super), the average is $2,083.70 per week, or $108,352 annually. These figures help you compare your salary to the broader market. See our Benchmarks page for more details.
Important notes
This guide provides a resident estimate only. It does not account for the Medicare levy surcharge (if you do not have appropriate private hospital cover), HELP/HECS repayments, or salary sacrifice arrangements. The Australian Taxation Office publishes official tax tables and calculators. Always consult a tax professional for advice specific to your situation. This estimate is not a tax assessment.
Questions
What is salary sacrifice?
Salary sacrifice is an arrangement where you agree to forgo part of your pre-tax salary in exchange for benefits such as additional super contributions, a car, or other non-cash benefits. This reduces your taxable income, potentially lowering the tax you pay. The Australian Taxation Office sets rules on what can be sacrificed and any fringe benefits tax that may apply.
How is the Medicare levy calculated?
The Medicare levy is 2% of your taxable income. For singles, there are thresholds: if your taxable income is $28,011 or less, you pay no levy; between $28,011 and $35,013, the levy is 10c per $1 over the lower threshold; above $35,013, you pay the full 2%. Full-time salaries typically pay the full 2%.
What are the tax brackets for 2026–27?
For 2026–27, the resident tax rates are: nil on income up to $18,200; 15c per $1 over $18,200 up to $45,000; $4,020 plus 30c per $1 over $45,000 up to $135,000; $31,020 plus 37c per $1 over $135,000 up to $190,000; and $51,370 plus 45c per $1 over $190,000. The Low Income Tax Offset (LITO) can reduce tax further.