​​​​​Salary sacrifice is a key component of salary packaging. It refers to the situation whereby the employee’s cash salary is reduced and the employee directs the employer to make payments or contributions towards other benefits on their behalf. Salary sacrifice arrangements typically involve, but are not limited to: 

• superannuation; 
  
• subscription fees; 
  
• mortgage repayments; 
  
• novated leases; 
  
• school fees; and 
  
• shares.

Any remuneration foregone by an employee falls within the definition of wages as being “paid or payable in cash or in kind” and remains taxable for payroll tax purposes.

Some benefits such as subscription fees, mortgage repayments, novated leases and school fees are subject to fringe benefits tax (FBT). Payroll tax liability on these benefits is satisfied with the inclusion of the value of fringe benefits in taxable wages.

Salary sacrificing for superannuation is a payment ‘in kind’ not subject to FBT, and payroll tax liability on the payment is satisfied by including employer superannuation contributions in taxable wages.