Salary Sacrifice Arrangements

Technical Articles

Employees can forgo part of their future entitlement to salary or wages in exchange for non-cash benefits.  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 in these arrangements 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 tax specialists at (08) 9367 7023.

Category: Technical Articles