Is salary sacrificing worthwhile? A guide to your take-home pay

What is salary sacrificing?

Salary sacrificing – also called salary packaging or total remuneration packaging – is an agreement between you and your employer to swap part of your pre-tax salary for benefits of similar value. Common benefits include a car, laptop, childcare, or extra super contributions. Because the sacrificed amount is not included in your taxable income, you may pay less income tax and Medicare levy.

As the Australian Taxation Office explains, a salary sacrifice arrangement must be entered into before you perform the work, and you cannot access the sacrificed salary as cash. Your employer still must pay the full super guarantee (12% from 1 July 2026) on your original salary, not the reduced amount.

How salary sacrificing affects your take-home pay

Your take-home pay is what lands in your bank account after income tax and the Medicare levy. Salary sacrificing reduces your taxable income, which can lower the tax withheld. But the benefit you receive (e.g., a car) is not cash – it replaces part of your salary. So your actual cash take-home may be lower, even if your tax bill drops.

Consider the example from the ATO for the 2025–26 year. An employee with an annual remuneration of $65,000 who salary sacrifices a car worth $17,353 (without employee contributions) ends up with a taxable income of $47,647. After income tax ($5,082.10) and Medicare ($952.94), their after-tax income is $41,611.96 – but they have no car expenses to pay. Compare that to no packaging: taxable income $65,000, tax $10,288, Medicare $1,300, after-tax $53,412, then they pay $11,500 in car expenses, leaving net disposable income of $41,912. The difference is small. However, if the employee makes a contribution of $7,000, their net disposable income rises to $43,593.40 – a clear benefit.

Your marginal tax rate matters. For 2026–27, the rates are:

• $0 – $18,200: nil
• $18,201 – $45,000: 15c per $1 over $18,200
• $45,001 – $135,000: $4,020 plus 30c per $1 over $45,000
• $135,001 – $190,000: $31,020 plus 37c per $1 over $135,000
• Over $190,000: $51,370 plus 45c per $1 over $190,000

Plus the Medicare levy of 2% (full rate for most full-time workers). The Low Income Tax Offset (LITO) can reduce tax for lower incomes, but salary sacrificing may push you into a lower bracket or reduce your LITO entitlement.

Is salary sacrificing worthwhile?

The question “is salary sacrificing worthwhile” depends on your personal circumstances. As Moneysmart notes, it is usually more effective for people on middle to high incomes because their marginal tax rate is higher. But there are trade-offs:

Fringe benefits tax (FBT)

Most packaged benefits are fringe benefits, and your employer must pay FBT at the top marginal rate (including Medicare levy). This cost may be passed on to you through lower salary or employee contributions. Some benefits are exempt from FBT, such as super contributions (if paid to a complying fund) and certain work-related items – but from 1 April 2027, work-related items provided through salary sacrifice will no longer be exempt.

Super contributions

Salary sacrificing into super can be tax-effective because contributions are taxed at 15% within the fund, rather than your marginal rate. However, the concessional contributions cap is $32,500 for 2026–27 (including your employer’s super guarantee). Exceeding the cap incurs extra tax. Also, salary sacrificed super is not a fringe benefit, so no FBT applies.

Impact on other obligations

A lower taxable income can reduce your Medicare levy surcharge (if you don’t have private health insurance), lower compulsory repayments for study or training loans, and affect child support or government benefits. The ATO warns that you should consider these impacts before entering an arrangement.

Minimum wage and average pay

For context, the national minimum wage is $26.44 an hour and $1,004.90 a week (from 1 July 2026). The average full-time adult ordinary time earnings are $2,083.70 per week. If you earn around these levels, salary sacrificing may still be worthwhile for benefits like super or a car, but the tax savings are smaller because your marginal rate is lower.

How to decide

Start by calculating your current take-home pay using the Take-home pay guide. Then estimate how salary sacrificing would change your taxable income. Use the Salary packaging page for more details on common benefits. Remember that you cannot package after you’ve earned the income – the arrangement must be in place beforehand.

If you are considering salary sacrificing into super, check the Super guide for contribution caps and tax treatment. Also review the Tax and Medicare page for the latest thresholds and offsets.

Ultimately, the answer to “is salary sacrificing worthwhile” is: it can be, but only if the benefits you receive are things you would otherwise pay for with after-tax dollars, and if the tax savings outweigh any FBT or employee contributions. Professional tax advice is strongly recommended.