Salary sacrifice arrangements for employees

Technical Article, Published: 04/04/2019

Employees can sacrifice part of their future entitlement to salary or wages in exchange for non-cash benefits. This arrangement is also commonly referred to as salary packaging or total remuneration packaging. This is an arrangement between an employer and employee, there is no restriction on the types of benefits that can be included in salary packaging as long as these benefits form part of the employee’s remuneration. Common benefits include car and loan repayments, work-related items such as laptops and tools, as well as superannuation.


Salary packaging may appeal to employees because income tax is only calculated on the reduced salary. However, both employers and employees need to ensure that the agreements entered into meet the requirements of effective salary sacrifice arrangements. Furthermore, it is important to consider the implications of such arrangements on other areas of taxation such as Fringe Benefits Tax (FBT), reportable fringe benefits amounts, Goods and Services Tax (GST), and superannuation concessional contributions caps.


For further information or advice, please contact our office for a consultation on (08) 9345 0499.

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