What is salary sacrifice from an employer’s perspective?
Understand how salary sacrifice arrangements work for employers and what obligations apply.
Summary
Salary sacrifice is a formal arrangement where an employee agrees to forgo part of their pre-tax salary in exchange for benefits of a similar value. Employers must ensure the arrangement is effective and meet related tax, super and reporting obligations.
What this means
For an arrangement to be effective, it should generally be agreed before the employee earns the salary being sacrificed. The sacrificed amount is provided as an agreed benefit rather than being available to the employee as cash salary. Common arrangements include additional super contributions and certain fringe benefits.
Salary-sacrificed super is generally an employer contribution and does not reduce the employer’s SG obligation. Under Payday Super, salary-sacrifice super amounts are included in the qualifying-earnings framework and need to be handled correctly through payroll and STP. Other salary-sacrifice benefits may attract FBT and need separate reporting.
Typical actions
- Document the salary sacrifice arrangement before the employee earns the relevant salary.
- Identify whether the sacrificed benefit is super, a fringe benefit or another permitted benefit.
- Do not use salary-sacrifice contributions to reduce the employer’s SG obligation.
- Report salary sacrifice and super amounts correctly through STP.
- Review FBT consequences for non-super benefits.
Official ATO sources
Last checked: 25 August 2026
Salary sacrificing
Explains salary sacrifice arrangements from an employer perspective.
How to set up salary sacrifice for super
Explains how employers set up salary sacrifice for super.
Related questions
- What is the superannuation guarantee?
- What is FBT?
- What is a reportable fringe benefit amount?
- What is the difference between an allowance, a reimbursement, and a fringe benefit?
Important notice: Tax Clarity is an independent information tool. This page provides general information based on official sources. It does not provide tax, legal, financial, or accounting advice. Tax rules can change, and how they apply depends on your circumstances. For advice about your situation, speak with a registered tax agent or qualified professional.
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