Salary sacrifice arrangements

A salary sacrifice (or salary packaging) arrangement (SSA) is an agreement between an employer and employee to replace future cash salary with in kind benefits. Based on the different tax outcomes for different components of remuneration (eg salary, benefits, superannuation contributions), the SSA is intended to increase the after-tax (take home) value of an employee’s remuneration without increasing the total cost to the employer.

Various employees can benefit from salary sacrifice, including executives, professional staff, trades staff and award workers.

The Australian Taxation Office has published guidance of when SSAs are effective SSAs and when they are ineffective to achieve particular tax outcomes. An effective SSA must be prospective — it must be an agreement to substitute future salary for benefits from the employer.

See What is a salary sacrificing arrangement?