What are the implications of an effective salary sacrifice arrangement for employers?


A salary sacrifice arrangement giving employees a non-cash benefit may result in you having FBT obligations for those non-cash benefits.

Assessable income

The reduced salary amount specified in a salary sacrifice arrangement becomes the employee's assessable income.


If you are registered for GST, you may be able to claim a GST credit for GST paid in providing the benefit. For fringe benefits that are subject to GST and where you hold a valid GST invoice, you are entitled to claim the GST credit when submitting your activity statement.

Employee contributions

The taxable value of a benefit may be reduced through the payment of employee contributions. The amount sacrificed does not count as an employee contribution when determining the taxable value of any fringe benefits the employee receives. Employee contributions must be paid out of the employee's after-tax income.

PAYG withholding and payment summaries

PAYG tax withheld should be based on gross salary and wages paid and should not include salary-sacrificed amounts. The employee's PAYG payment summary should show the gross amounts of all salary and wages (excluding salary-sacrificed amounts) and the relevant total amount of PAYG tax withheld for the year.


Where an employee's individual fringe benefits amount is more than $2,000 (that is, the equivalent grossed-up taxable value of $3,738), you must report the grossed-up value on their payment summary.

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    Last modified: 18 Jan 2012QC 17808