Salary Sacrifice Calculator | Australia

Salary sacrifice (also called salary exchange) is an arrangement where you agree to reduce your gross salary in exchange for a non-cash benefit from your employer, such as a pension contribution, electric vehicle, cycle to work scheme, or childcare vouchers. Because your gross salary is lower, you pay less income tax and National Insurance.

Instead of making pension contributions from your net pay, your employer pays the contribution on your behalf directly from your gross salary. This means your taxable salary is reduced, saving you income tax and National Insurance. Your employer also saves on employer National Insurance (13.8%), and some employers pass this saving on to employees as an extra pension contribution.

Yes. EV salary sacrifice schemes allow you to lease a fully electric car through your employer at a significantly reduced cost because you pay for it from pre-tax salary. The benefit-in-kind (BIK) tax rate for zero-emission cars is just 3% for 2025/26, making this one of the most tax-efficient benefits available.

The Cycle to Work scheme lets you get a bicycle and cycling equipment tax-free up to a value set by your employer (often £1,000–£5,000). You repay the cost through salary sacrifice over 12–18 months, saving income tax and NI on the full amount, effectively discounting the bike by your marginal tax rate.

Higher-rate taxpayers (40% tax) benefit most, as they save 40% tax plus 8% NI on sacrificed amounts — an effective saving of up to 48p for every £1 sacrificed. Basic-rate taxpayers save 20% tax plus 8% NI (28p per £1). However, it is beneficial for almost everyone who pays tax and NI.

Salary sacrifice reduces your declared gross salary, which some lenders use to calculate how much they will lend you. This can reduce your maximum mortgage offer. However, many lenders now account for salary sacrifice arrangements. It is worth declaring any salary sacrifice to your mortgage adviser so they can present your full income accurately.

Student loan repayments are calculated based on your gross salary after salary sacrifice deductions. This means salary sacrifice reduces the salary used for student loan calculations, lowering your monthly repayments. This can be beneficial but also means you repay your loan more slowly.

This calculator provides an estimate based on the tax and NI rates you enter. It does not account for employer NI savings, the impact on state pension entitlements, student loan repayments, or other benefits linked to salary level. For a comprehensive analysis, speak to your employer's HR or payroll team or a financial adviser.