How a Salary Sacrifice Form Changes Your Fortnightly Take-Home Pay

Understanding Your Fortnightly Pay: Tax, Medicare, and Salary Sacrifice

Your take-home pay is what lands in your bank account after tax and the Medicare levy are deducted. But if you use a salary sacrifice arrangement, the calculation changes. This guide explains how tax brackets, the Medicare levy, and super contributions affect your fortnightly pay, and what happens when you complete a salary sacrifice form with your employer.

Tax Brackets for 2026–27

The Australian Tax Office applies a progressive tax system. For the 2026–27 income year, the rates are:

• $0 – $18,200: Nil
• $18,201 – $45,000: 15c for each dollar over $18,200
• $45,001 – $135,000: $4,020 plus 30c for each dollar over $45,000
• $135,001 – $190,000: $31,020 plus 37c for each dollar over $135,000
• Over $190,000: $51,370 plus 45c for each dollar over $190,000

Your marginal tax rate determines how much of each extra dollar goes to tax. The Medicare levy adds another 2% for most taxpayers, but if your taxable income is below $28,011 (single), you pay no Medicare levy. Between $28,011 and $35,013, you pay a reduced rate of 10c per dollar over the lower threshold.

How Salary Sacrifice Affects Your Taxable Income

When you sign a salary sacrifice form, you agree to receive less salary before tax in exchange for benefits like a car, laptop, or extra super. The Australian Taxation Office explains that this reduces your taxable income, meaning you pay less income tax and Medicare levy. However, your employer may need to pay fringe benefits tax (FBT) on the benefit, and they might ask you to make employee contributions to lower that FBT.

Consider the ATO’s example for Sam, who earns $65,000 annually. Without salary sacrifice, Sam’s taxable income is $65,000, and after tax and Medicare (using 2025–26 rates) they have $53,412. After paying $11,500 in car expenses, their net disposable income is $41,912. If Sam salary sacrifices a car worth $17,353 without employee contributions, their taxable income drops to $47,647, tax and Medicare fall to $6,035, and net disposable income is $41,612 – slightly less. But if Sam makes a $7,000 employee contribution, taxable income is $60,855, tax and Medicare are $10,262, and after the contribution and no car expenses, net disposable income rises to $43,593. This shows how a well-structured salary sacrifice can boost your take-home cash.

The Role of Superannuation

Super is not deducted from your take-home pay if your job advertisement states a salary “plus super”. The employer’s 12% super guarantee (from 1 July 2026) is paid on top of your salary. However, if you salary sacrifice additional super via your salary sacrifice form, those contributions are treated as employer contributions and reduce your taxable income. They are not subject to FBT. Your employer must still pay the super guarantee on your original salary, not the sacrificed amount.

The Low Income Tax Offset (LITO)

If your taxable income is below $66,667, you may be eligible for the Low Income Tax Offset. For 2026–27, the maximum offset is $700 for incomes up to $37,500, then it phases out. This offset can reduce your tax to zero but cannot create a refund. It is automatically applied when your employer uses the correct tax tables.

Putting It All Together

Your fortnightly pay changes based on:

• Tax bracket: Higher earnings push you into a higher marginal rate.
• Medicare levy: Full 2% if you earn over $35,013 as a single.
• Salary sacrifice: Lowers taxable income but may reduce take-home cash depending on the benefit and employee contributions.
• Super: Employer contributions don’t affect your pay, but salary-sacrificed super does reduce your take-home.

To estimate your own numbers, use the Take-home pay calculator on this site. For more on structuring benefits, see the Salary packaging guide. Remember, this is an estimate only and does not include HELP/HECS repayments, the Medicare levy surcharge, or payroll tax rounding. Always consult a tax professional for your situation.