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  • Salary sacrifice arrangements

    Under a salary sacrifice arrangement, an employee may agree to forgo part of their future entitlement to salary or wages in return for benefits of a similar value.

    Under an effective salary sacrifice arrangement:

    • the employer may be liable to pay FBT on the fringe benefits provided
    • the employee pays income tax on the reduced salary or wages
    • superannuation contributions paid in lieu of forgone benefits are classified as employer contributions (rather than employee contributions) and are taxed in the superannuation fund
    • from 1 January 2020, salary sacrificed contributions don't
      • reduce the ordinary time earnings that the employer is required to calculate their employee's super entitlement on
      • count towards the amount of super guarantee contributions that an employer is required to make for them to avoid the super guarantee charge.

    See also:

      Last modified: 10 Feb 2021QC 16948