What Can You Salary Sacrifice?
As an employee looking to maximise your earnings, the foremost question that could be on your mind is: What can I salary sacrifice?
Our short answer to this would be: A lot, actually.
But before we proceed with the nitty-gritty, we want to say we’re glad you’re considering this option because there are several benefits of salary sacrifice. However, the foremost advantage of salary sacrifice is that you get more mileage from your income, depending on the industry you’re a part of.
In a salary sacrifice arrangement, you are agreeing to receive less take-home earnings from your employer in return for certain benefits that are to be paid out of your pre-tax salary. Such benefits could come in the form of goods and services (e.g., a car or laptop) or contributions to your superannuation account.
Who Can Salary Sacrifice
People who can salary sacrifice must be permanent full-time or part-time employees, or temporary employees with contracts lasting at least three months in duration.
Employees who want to salary sacrifice must communicate their intent to their employer and enter into a salary sacrifice agreement.
Casual employees are usually not eligible for salary packaging, but a company’s employee benefits team can decide on this based on established work patterns.
It must also be noted here that certain benefits only apply to specific industries. In general, salary sacrificing is available in the following sectors:
- Healthcare
- Private companies and corporations
- Government (local, state and territory)
- Education
- Public benevolent institutions or PBIs
Understanding Fringe Benefits
If you’re wondering: Is salary sacrifice a fringe benefit?
The answer is no. However, you can salary sacrifice for a fringe benefit. But what are fringe benefits, anyway?
Fringe benefits are extra benefits that supplement an employee’s wage or salary. In Australia, a fringe benefit is a benefit given in respect of employment. It is provided by an employer to employees or associates in relation to their employment, role or job.
Common examples of fringe benefits include cars, expense payments (rent payments, school fees, childcare costs, etc.), property (e.g., goods, shares or bonds and real property like land and buildings), gym memberships, concert tickets and more.
Employers usually need to pay fringe benefits tax (FBT) on these benefits, except if they qualify for an exemption. For example, if your employer is a not-for-profit organisation, they may be exempted from paying FBT.
However, there are a number of benefits exempt from the fringe benefits tax, referred to as exempt benefits. These can only be used for work-related reasons. Portable electronic devices such as laptops and phones, protective clothing, computer software, work tools and the briefcase you use for work are all examples of exempt benefits. This means your employer typically won’t have to pay any FBT on these.
What Can You Salary Sacrifice?
To answer your original concern regarding what you can salary sacrifice, the most common salary packaging items or benefits include motor vehicles (i.e., novated lease), childcare, rent, mortgage and investment loans, insurance, portable electronic devices and so on.
To help you with this, we’ll go over each of these benefits based on their popularity in the following sections.
1. Salary Package Motor Vehicles (Fringe Benefit)
Car salary packaging is, without a doubt, one of the most popular benefits targeted for salary sacrificing through novated leasing. If you opt to salary sacrifice a car, you can get a new vehicle using pre-tax dollars, thereby saving money in the process. You also don’t have to worry about paying for goods and services tax (GST) or running costs.
Can be salary sacrificed by:
☑ Healthcare ☑ Corporate ☑ Government ☑ Education ☑ PBI
2. Salary Sacrifice Superannuation (Unclassified)
Superannuation salary sacrifice is another very common option that employees consider highly beneficial when it comes to salary packaging arrangements.
Salary sacrificing super contributions involves a reduction in your take-home pay so you can put more money into your nest egg. You can do this by asking your employer to pay a portion of your pre-tax earnings into your super account. This amount is on top of the superannuation contribution they are already paying you under the Superannuation Guarantee.
Regarding how much you can salary sacrifice into your superannuation, the condition is quite simple: the combined total of your employer’s mandated and salary sacrificed concessional (super) contributions should not exceed $25,000 per financial year.
Can be salary sacrificed by:
☑ Healthcare ☑ Corporate ☑ Government ☑ Education ☑ PBI
3. Salary Sacrifice Mortgage and Investment Loans (Fringe Benefit)
You may choose to salary sacrifice your mortgage or home loan to drastically reduce your taxable income, but this will depend on the company you work for as well as the industry you work in.
Charity, health and not-for-profit industries usually allow the salary sacrificing of mortgage payments, provided these are owner-occupier loans. But even if you’re qualified to salary sacrifice your mortgage, not all lenders permit the salary sacrificing of home loan repayments. Your only option here is to refinance with a different lender that permits salary sacrifice.
If you’re planning to salary sacrifice investment loan repayments, this is usually not allowed in whatever industry you are a part of.
Can be salary sacrificed by:
☑ Healthcare ❌ Corporate ☒ Government ☒ Education ☑ PBI
4. Salary Sacrifice Rent (Fringe Benefit)
If you salary sacrifice rent or make rental payments with pre-tax funds, you’ll be paying less taxes and have more of your income left over for spending on other things.
You are permitted to salary package rental payments if you work for a charity or other types of not-for-profit organisations, or a public or private not-for-profit healthcare institution. If you are employed in a private school, club, association or religious institution and your employer offers rent salary sacrifice as an employment benefit, you can also apply for this salary packaging option.
Can be salary sacrificed by:
☑ Healthcare ❌ Corporate ❌ Government ☑ Education ☑ PBI
5. Salary Sacrifice Insurance (Fringe Benefit)
If you’re wondering whether to salary sacrifice private health insurance premiums to save money for other things, you could qualify for this benefit if you are employed in a private or public not-for-profit hospital.
Those who work in a charity or other PBIs can also salary sacrifice health insurance. If you work for a private school, club, association or religious institution, and your employer offers health insurance salary packaging as a benefit, you can go for this as well.
Can be salary sacrificed by:
☑ Healthcare ❌ Corporate ❌ Government ☑ Education ☑ PBI
6. Salary Sacrifice Laptop (Exempt Benefit)
You can salary sacrifice a laptop you use for work that’s also FBT-exempt to avoid spending on a potentially expensive device.
Can be salary sacrificed by:
☑ Healthcare ☑ Corporate ☑ Government ☑ Education ☑ PBI
7. Salary Sacrifice Mobile Phone (Exempt Benefit)
Can you salary sacrifice a mobile phone? Yes, according to the Australian Taxation Office (ATO), you can definitely salary sacrifice a new mobile phone, which is also FBT-exempt. However, it should be used primarily for work.
Can be salary sacrificed by:
☑ Healthcare ☑ Corporate ☑ Government ☑ Education ☑ PBI
8. Salary Sacrifice Childcare (Fringe Benefit)
If you need professional or paid childcare for your kids when you’re at work, you may be able to salary sacrifice childcare fees as long as the facility is a registered service provider. However, salary packaging childcare expenses can also affect the gross value of your salary and your entitlement to government benefits.
Can be salary sacrificed by:
☑ Healthcare ☑ Corporate ☑ Government ☑ Education ☑ PBI
9. Salary Sacrifice School Fees (Fringe Benefit)
Can you salary sacrifice private school fees?
Yes, you can salary sacrifice school tuition fees if you work for a private or public not-for-profit hospital, PBI, private school, club, association or religious institution, and school fee salary packaging is offered by your employer as a benefit.
Can be salary sacrificed by:
☑ Healthcare ❌ Corporate ❌ Government ☑ Education ☑ PBI
10. Salary Sacrifice Gym Membership (Fringe Benefit)
You can salary package certain types of memberships such as newspaper and magazine subscriptions, club and professional memberships. However, only employees of charities and other PBIs, or public and private hospitals can salary package non-work-related club or association fees. So if you work within these sectors, you can salary sacrifice gym membership.
Can be salary sacrificed by:
☑ Healthcare ❌ Corporate ❌ Government ❌ Education ☑ PBI
Other Benefits that Can Be Salary Sacrificed
As long as you and your employer agree upon a salary sacrificing arrangement, there are very few restrictions to the benefits you can ask for regardless of the industry you’re a part of. The main thing here is that it is understood these benefits form part of your remuneration.
The only concern of your employer would be what items they will need to pay fringe benefit taxes for. This is why it’s usually easier for employers to include FBT-exempt benefits in salary packaging.
Aside from the common fringe and exempt benefits discussed above, there are other benefits you can try asking for during your salary packaging negotiations:
- Home internet costs
- Protective clothing
- Work tools and accessories
- Salary sacrifice software
- Airport lounge membership
- Financial advice
- Living away from home allowance
- PDA
- Professional subscriptions
- Relocation expenses
- Self-education expenses
- Uniforms
- Union membership
- Work-related travel expenses
There are also a few industry-specific salary sacrifice options, such as:
- Your or your spouse’s credit card payments
Can be salary sacrificed by:
☑ Healthcare ❌ Corporate ❌ Government ☑ Education ☑ PBI
- Car parking expenses
Can be salary sacrificed by:
☑ Healthcare ❌ Corporate ❌ Government ☑ Education ☑ PBI
- Meal and entertainment cards
Can be salary sacrificed by:
☑ Healthcare ❌ Corporate ❌ Government ❌ Education ☑ PBI
If these benefits are offered by your employer as part of your workplace benefits program, no one can bar you from asking for these to be part of your salary packaging options.
How Much Can I Salary Sacrifice?
There’s actually no specific salary sacrifice ceiling amount, except in instances where your employer belongs to a specific category (e.g., healthcare or PBI) according to the Australian Taxation Office (ATO) guidelines.
Why Salary Sacrifice with Easi?
Easi’s goal is to make the salary packaging process an easy and convenient option for both employers and employees.
We’re ready to assist with educating employers and employees on salary sacrifice arrangements and in setting up salary packaging. We provide streamlined novated leasing services to facilitate your car salary sacrifice agreement quickly and easily.
Got more questions about salary sacrifice or salary packaging?
Please get in touch with Easi today!
