Salary packaging (also called salary sacrifice or total remuneration packaging) can interact with superannuation in important ways. How the arrangement is structured affects employer SG obligations, FBT liability, and the employee’s overall tax position.
How Salary Packaging Works With Super
In a salary packaging arrangement, an employee agrees to forgo a portion of their future salary in exchange for the employer providing benefits — including super contributions. The interaction with super depends on whether the arrangement affects the base salary on which SG is calculated.
Two Types of Salary Packaging Arrangements
1. Salary Sacrifice Into Super
The most common form: the employee sacrifices pre-tax salary into additional concessional super contributions. The benefits:
- Contributions taxed at 15% (contributions tax) rather than marginal rate
- Reduces assessable income for income tax purposes
- Counts toward the concessional contributions cap ($30,000 in FY2024–25, including employer SG)
Key rule: Under a pure salary sacrifice into super arrangement, the employer’s SG obligation is calculated on the reduced (post-sacrifice) salary unless the employment contract specifies otherwise. This means salary sacrifice can sometimes reduce the employer’s SG base.
Employee action: Check your employment contract — some contracts guarantee SG is calculated on the pre-sacrifice salary (protecting the employee’s total super).
2. Salary Packaging of Non-Cash Benefits (FBT Items)
Employees may sacrifice salary in exchange for employer-provided benefits such as:
- A car (novated lease)
- Electronic devices (laptops, phones)
- Meal entertainment
- Remote area housing
These benefits are generally subject to Fringe Benefits Tax (FBT), which the employer pays. The FBT rate in FY2024–25 is 47% on the taxable value of the benefit.
FBT-exempt items: Laptops and devices used primarily for work, work-related items, protective clothing — these don’t trigger FBT.
Impact on super: SG is calculated on the salary before sacrifice (OTE is generally the ordinary salary, before sacrificed benefits are removed) — but this depends on how the employment contract is structured.
FBT Exemptions That Affect Salary Packaging
| Employer type | FBT-exempt salary packaging limit | Common uses |
|---|---|---|
| Public benevolent institution (PBI) | $15,900 per year | General living expenses (mortgage, rent, utilities) |
| Hospital/health promotion charity | $9,010 per year | General living expenses |
| Other public hospitals / ambulance services | $17,000 per year | General living expenses |
| Standard commercial employer | No general living expenses exemption | Device, car, work items only |
Employees of PBIs and hospitals can package living expenses tax-free — effectively receiving part of their salary without paying income tax on it. This is a significant benefit, particularly for healthcare workers.
Super on Salary Packaged Benefits
When an employee salary packages non-cash benefits:
- The employer’s FBT liability is based on the taxable value of the benefit
- The employee’s reportable fringe benefit amount (RFBA) appears on their payment summary/income statement
- The RFBA can affect income-tested obligations such as the Medicare levy surcharge income threshold, HECS-HELP repayment income, and some Centrelink payments
Super is not paid on FBT benefits themselves — FBT is a separate tax paid by the employer. The benefit value does not form part of OTE.
Common Mistakes With Salary Packaging and Super
- Employer reduces SG base after salary sacrifice — not always appropriate; depends on contract wording
- Employee thinks salary sacrifice does not count toward concessional cap — it does; all salary sacrifice super is concessional
- Not reviewing RFBA impact on other income tests — a large RFBA can push employees into higher HECS or Medicare levy territory
- FBT benefits treated as salary for super purposes — they are not
Frequently Asked Questions
If I salary sacrifice into super, does my employer still pay SG? Yes — but whether SG is calculated on your pre- or post-sacrifice salary depends on your employment contract. Some employers calculate SG on the original (pre-sacrifice) salary as a matter of policy; others calculate on the post-sacrifice salary.
Does packaging a car (novated lease) affect my super? No — the car’s FBT taxable value is not OTE and does not affect SG calculations. Your employer’s SG is calculated on your cash salary component.
Is salary sacrifice into super still worth it if I’m close to the concessional cap? If you’re approaching the $30,000 concessional cap (including employer SG), additional salary sacrifice could breach the cap. Monitor your total concessional contributions during the year.
For more: Salary Sacrifice Super, Concessional Contribution Cap, Ordinary Time Earnings. For advice tailored to your situation, speak with a licensed financial adviser via MoneySmart.