Salary Sacrifice: What Is It And How Does It Work?

A salary sacrifice arrangement (salary packaging or total remuneration packaging) is an arrangement between employer and employee — the employee agrees to forgo part of his future entitlement to salary or wages. In return, the employer provides the employee with benefits of the same value.

Salary sacrifice reduces your taxable income and the amount of tax you pay.

Seek financial advice before entering into this arrangement as it’s effectiveness depends on your financial situation.

Note: Before you start the work, set up the arrangement with your employer. It may be ineffective if it’s not put into place until after you have performed the work.

Employer and employee’s agreement

You can renegotiate a salary sacrifice arrangement. Employees can renegotiate amounts of wages or salary to be sacrificed before the start of their renewable contract — subject to the terms of any employment contract or industrial agreement.

Your employment contract may vary depending on the agreement between you and your employer. Although it can be verbal, it’s better to have an agreement in writing. It’s hard to establish the facts of your salary sacrifice arrangement if it’s undocumented.

Salary sacrifice contributions are considered to be from the employer, who’s only required to meet 9.5% super guarantee obligation.

If you choose to salary sacrifice 5% into your super, your employer would only have to contribute 4.5%. Although, if you choose 9.5% or more into your super, your employer would not be required to make any additional contributions.

The terms of the agreement should be in place to ensure your employer still pays you the 9.5% super guarantee.

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Benefits provided in salary sacrifice arrangements

Generally, the types of benefits provided in salary sacrifice arrangements by employers include:

  • Fringe benefits — cars, property, expense payments
  • Exempt benefits — a briefcase, a portable electronic device, a tool of trade, and other work-related items
  • Super — salary sacrificed super contributions (taxed at 15%) are considered as employer super contributions. This reduces the superannuation to be paid by your employer when meeting their super obligations.

Implications of a salary sacrifice arrangement

Be mindful of the implications of the salary sacrifice arrangement on you and your employer. This may affect the following:

  • Super guarantee — your employer is required to only meet their 9.5% super guarantee obligation.
  • Assessable income — less income tax liability for you
  • Fringe benefits tax — your employer should pay the fringe benefits tax.
  • Deductible expense — your employer will not have to pay fringe benefits tax (FBT) if they pay for an expense, which you would normally get a tax deduction for.
  • Super — your earnings base may be reduced.
  • Reportable fringe benefits — you will need to show this amount on your tax return.

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Quick loans from Cigno

If you’re under a salary sacrifice arrangement, your income may not suffice for now. You may find your cash won’t suffice to cover the bills.

You can apply for quick loans online in Australia.

With Cigno Loans, you can get up to $1000 paid directly into your account. The online application makes the process fast and simple. Hence, fast turnaround time and approval for borrowers with urgent needs.

Compared with competitors, Cigno can help you to apply for quick loans, which can be repaid over a lesser time period.

Disclaimer: Please be aware that Cigno Loans’ articles do not replace advice from an accountant or financial advisor. All information provided is intended to be used as a guide only, as it does not take into account your personal financial situation or needs. If you require assistance, it is recommended that you consult a licensed financial or tax advisor.


Ordered by the Federal Court of Australia

The Federal Court of Australia has found that Cigno Australia Pty Ltd (Cigno Australia) and BSF Solutions Pty Ltd (BSF Solutions) have breached the law by engaging in unlicensed credit activity and charging prohibited fees.

In the period from July 2022 to 3 October 2023, over 100,000 consumers have been lent a total of $34 million, and charged fees of over $70 million, under the ‘No Upfront Charge Loan Model’ operated by BSF Solutions and Cigno Australia. At no time has either BSF Solutions or Cigno Australia held an Australian Credit Licence.

The Court also found that Mark Swanepoel (director of Cigno Australia) and Brenton James Harrison (director of BSF Solutions) were involved in these breaches of the law.

With effect from 24 May 2024, the Court has granted permanent injunctions preventing Cigno Australia and BSF Solutions from:

  • demanding, receiving or accepting fees or charges, including amounts of loan principal, from consumers in relation to credit provided under the ‘No Upfront Charge Model’; and
  • engaging in further credit activity pursuant to the ‘No Upfront Charge Loan Model’, including by entering into new agreements with consumers, for so long as they do not hold an Australian Credit Licence.

Cigno Australia was ordered by the Court to, by 5th July 2024, send written communications to consumers who between July 2022 and December 2022 entered into agreements with Cigno Australia and BSF Solutions under the ‘No Upfront Charge Loan Model’.

The Court will later determine whether (among other things) Cigno Australia and Mark Swanepoel ought to pay a pecuniary penalty in respect of this conduct, and whether Mark Swanepoel should be restrained from carrying on a business engaging in credit activity.

Cigno Australia, BSF Solutions, Mr Swanepoel and Mr Harrison intend to appeal the decision of the Court and have filed an application for leave to appeal. If the appeal is successful, some or all of the orders of the Federal Court of Australia may be set aside.

Where can you get more information?

Where to go for further support

You can access legal advice in your state at: Free legal advice –

If you are experiencing trouble with debt, or money worries in general, contact:

  • the National Debt Helpline on 1800 007 007 or online chat (9:30am to 4.30pm, Monday to Friday).

If you need someone to talk to, contact:

  • Lifeline on 13 11 14 (24 hours) or their crisis support online chat or
  • Beyond Blue on 1300 22 46 36 (24 hours) or their webchat