Salary Sacrifice Calculator
Calculate the tax benefits of salary sacrificing into superannuation or other benefits to reduce your taxable income.
Quick Use Samples
Salary Sacrifice Setup
Salary Sacrifice Items
Tax Savings Analysis
Detailed Comparison
By salary sacrificing a total of $20,000 from your gross salary, your taxable income is reduced to $55,000. This results in an estimated annual tax saving of $6,900. The sacrificed amount going to super ($5,000) is taxed at a lower rate of 15% inside the fund, boosting your retirement savings. Your overall net financial benefit, after accounting for the cost of the sacrificed items, is $6,900 per year.
Without vs. With Sacrifice
Pay Packet Impact
Your take-home pay will change by **$6,900** per year.
Long-term Superannuation Growth
An extra **$5,000** in super per year could grow to **$53,500** in 10 years (assuming 7% growth).
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What is Salary Sacrificing?
Salary sacrificing, also known as salary packaging, is an arrangement in Australia where an employee agrees to receive less pre-tax income from their employer in exchange for the employer paying for certain benefits of a similar value. The most common form is sacrificing into superannuation, but it can also be used for items like cars (novated lease) or laptops, depending on your employer's policies.
Behind the Formula
The calculator shows the tax benefit of salary sacrificing. It takes the amount you choose to sacrifice and deducts it from your gross salary *before* income tax is calculated. This lowers your taxable income, and therefore the amount of tax you have to pay. For superannuation, the sacrificed amount is taxed at a concessional rate of 15% inside the super fund. The calculator compares the tax you would have paid at your marginal rate with the 15% contributions tax to show your net tax saving.
Expert Insights
- There are annual caps on how much you can contribute to superannuation at the concessional tax rate (15%). This cap includes your employer's compulsory Super Guarantee contributions. Exceeding the cap can result in extra tax, so it's important to track your contributions.
- Salary sacrificing is most effective for middle-to-high-income earners, as the tax saving is greatest when your marginal tax rate is significantly higher than the 15% superannuation contributions tax.
- For employees of not-for-profit (NFP) or public health organisations, the salary packaging rules can be even more generous, allowing for a portion of income to be spent on general living expenses tax-free, which is a very powerful benefit.
Actionable Tips
- Check with your HR or payroll department to see what salary sacrificing options your employer offers. The options can vary significantly from one company to another.
- Start with a small, manageable amount into your super. You can always increase it later, and even a small extra contribution can make a huge difference to your retirement balance due to compounding.
- Be aware of the rules around a novated lease for a car. While it can be tax-effective, you are committing to a long-term financial product, so it's important to understand all the costs and conditions.
Real-World Examples
Boosting Superannuation
An employee earning $100,000 (in the 32.5% tax bracket) decides to salary sacrifice $10,000 into their super. They save $1,750 in tax, as the $10,000 is taxed at 15% in super instead of 32.5% (plus Medicare) as income.
A Nurse at a Public Hospital
A nurse at a public hospital can salary package up to $9,010 for living expenses like their mortgage or rent. This amount is not subject to income tax, providing them with a significant boost to their take-home pay each year.
Novated Car Lease
An employee enters into a novated lease for a new car. The lease payments, running costs, and insurance are deducted from their pre-tax salary, reducing their taxable income and making the car effectively cheaper to run than if they paid for it with their post-tax income.
Glossary of Terms
Concessional Contributions
Pre-tax contributions made to your superannuation fund, including employer SG contributions and salary sacrifice. They are taxed at a concessional rate of 15%.
Novated Lease
A three-way agreement between an employee, their employer, and a finance company to lease a car. The employer takes on the obligations for the lease payments, which are deducted from the employee's pre-tax salary.
Fringe Benefits Tax (FBT)
A tax that employers pay on certain benefits they provide to their employees, such as a company car or private health insurance. Salary packaging is designed to be FBT-exempt or FBT-efficient.