Fringe Benefits Tax (FBT) applies to many non-cash employee benefits — but contributions to superannuation made via salary sacrifice are generally exempt from FBT. Understanding the interaction between super and FBT matters for employees with salary packaging arrangements.
Is Salary Sacrifice Into Super Subject to FBT?
No. Super contributions made by an employer under a salary sacrifice arrangement are not fringe benefits and are therefore not subject to FBT.
This is one of the key advantages of salary sacrificing into super compared to other salary packaging options:
- Salary sacrifice into super: Exempt from FBT
- Salary sacrifice for a novated lease car: Subject to FBT (or FBT reduction via ECM method)
- Salary sacrifice for airline lounge memberships, personal expenses: Subject to FBT
The relevant exemption is in section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997) — super contributions made under a salary sacrifice arrangement are treated as employer contributions (SG or additional), not fringe benefits.
What Counts as a Super Contribution for FBT Purposes?
To be FBT-exempt as a super contribution, the salary sacrifice must result in:
- A contribution to a complying super fund
- The amount being a super contribution (not a fringe benefit in another form)
- The contribution meeting the employer SG reporting and payment requirements
If an employer structures a “super benefit” that is actually a cash payment or personal benefit delivered through a super-like mechanism, the ATO may treat it as a fringe benefit.
FBT-Exempt Employers and Super
Some employers — charities, public benevolent institutions (PBIs), public hospitals — are FBT-exempt or have reduced FBT liability under specific thresholds:
- PBIs and registered charities: FBT-exempt up to $30,000 (card threshold from 1 April 2024) in grossed-up value per employee
- Public hospitals: FBT cap of $17,000
For these employees, salary packaging non-super benefits (e.g., living expenses up to the cap) can be highly effective. Super salary sacrifice is already exempt and does not use up the FBT cap.
Division 293 Tax vs FBT
High-income earners ($250,000+ total income and super) pay an additional 15% tax on concessional super contributions via Division 293 tax. This is an income tax — not FBT — and is a separate assessment by the ATO based on personal income.
Division 293 tax effectively raises the concessional contribution tax rate from 15% to 30% for high earners, reducing (but usually not eliminating) the benefit of salary sacrifice.
How FBT Affects the SG Calculation
When an employee salary sacrifices, their cash wage is reduced. The Super Guarantee is calculated on Ordinary Time Earnings (OTE) — which is the reduced salary:
- If an employee’s contract reduces OTE through salary sacrifice, the employer’s SG obligation is calculated on the reduced amount
- Some modern awards and enterprise agreements require SG to be calculated on the pre-sacrifice salary — check your employment contract
For more: Salary Sacrifice Super, Division 293 Tax, Employer Super and Salary Packaging. For advice on salary packaging and super, speak with a licensed financial adviser via MoneySmart.