Disclaimer: This blog post is intended for informational purposes only and does not constitute legal, financial, or medical advice. Please consult with a qualified professional for advice tailored to your specific situation.

Running a small business is an exciting and empowering journey, especially as a female entrepreneur in Australia. However, with great empowerment comes great responsibility, and one crucial aspect of managing a business is understanding the financial tools available to you. One such tool is salary sacrifice, an arrangement that can help both you and your employees (if you have any) save money and plan better for the future.

This blog post will break down salary sacrifice from an Australian perspective, focusing on its benefits, legal considerations, and how it can help small, female-owned businesses thrive. By the end of this article, you’ll have a clear understanding of how salary sacrifice works and whether it’s the right choice for you and your business.

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What Is Salary Sacrifice?

Salary sacrifice, also known as salary packaging, is a legal arrangement where an employee agrees to “sacrifice” or forgo part of their pre-tax salary in exchange for certain benefits. These benefits can include superannuation contributions, a car under a novated lease, laptops, or even work-related expenses.

The main advantage of salary sacrifice is that it allows employees to reduce their taxable income, potentially lowering the amount of tax they pay. For employers, offering salary sacrifice arrangements can help attract and retain staff while also providing tax-effective benefits to their team.

Why Should Female-Owned Businesses Consider Salary Sacrifice?

As a small business owner, you may wonder why salary sacrifice is relevant to your business.

Here are some key reasons it’s worth considering:

Tax Efficiency for Yourself and Employees
If you employ staff, offering salary sacrifice options can be a great way to reduce taxable income for both you and your team. For example, by increasing superannuation contributions through salary sacrifice, you can save on taxes while helping employees build their retirement savings.
Attract and Retain Talent
In a competitive job market, especially in Australia’s small business landscape, offering salary sacrifice can make your business more appealing to potential employees. It’s a desirable perk that can help you stand out from competitors who may not offer this benefit.
Retirement Benefits for Female Entrepreneurs
As a female business owner, you might be juggling multiple responsibilities, which can sometimes mean neglecting your own financial future. Salary sacrificing part of your income into superannuation can help you build up your retirement savings while reducing tax liabilities. This is particularly important given that women in Australia tend to retire with less superannuation than men due to career breaks or part-time work.
Business Credibility
Offering salary sacrifice arrangements can showcase your business as professional and attentive to the financial wellbeing of your team. It’s a sign that you care about more than just profits—you care about people.

How Salary Sacrifice Works in Australia

To implement a salary sacrifice arrangement in your business, it’s important to understand how it works and the rules surrounding it.

Here’s a breakdown of the process:

1. The Arrangement Must Be Agreed Upon Beforehand

Salary sacrifice arrangements must be agreed upon between the employer (you) and the employee before the income is earned. This is usually formalized in writing to avoid any misunderstandings.

2. Pre-Tax Contributions

The sacrificed portion of salary goes directly towards the agreed benefit before the employee receives their pay. This reduces their taxable income and, in turn, the amount of income tax they pay.

3. Fringe Benefits Tax (FBT) Considerations

While salary sacrifice can be tax-effective, some benefits may attract Fringe Benefits Tax (FBT). For example, if you offer your employees a car under a novated lease, you may need to pay FBT on this benefit. However, superannuation contributions made through salary sacrifice are generally exempt from FBT.

4. Superannuation Guarantee

As an employer, you must pay the Superannuation Guarantee (SG) (currently 12% as of 2025) on your employees’ ordinary time earnings. Salary sacrifice contributions are typically in addition to this mandatory SG contribution unless otherwise agreed.

Benefits of Salary Sacrifice for Small Business Owners

Whether you’re a sole trader, a partnership, or a company owner, salary sacrifice offers several benefits:

1. Tax Savings

By salary sacrificing into superannuation, you can reduce your taxable income. For small business owners who are also employees of their own business, this can be a great way to save on tax while boosting your retirement fund.

2. Superannuation Growth

Women often face a superannuation gap due to time taken off for caregiving responsibilities. By salary sacrificing into your superannuation fund, you can help close this gap and secure your financial future.

3. Encouraging Financial Wellness for Employees

Offering salary sacrifice options shows your team that you care about their financial wellbeing. This not only boosts morale but also helps foster loyalty and trust among your employees.

4. Business Expense Management

Salary sacrifice can also be used to cover work-related expenses such as laptops, phones, or even professional memberships. This can reduce the financial burden on employees while ensuring they have the tools needed for their job.

What Can Be Included in a Salary Sacrifice Arrangement?

In Australia, a variety of benefits can be included in a salary sacrifice arrangement.

Here are some common examples:

Superannuation Contributions
One of the most popular salary sacrifice options, sacrificing into superannuation helps employees and employers save on taxes while boosting retirement funds.
Vehicles (Novated Leases)
Employees can salary sacrifice a car through a novated lease, which allows them to pay for the car and its running costs using pre-tax dollars.
Work-Related Equipment
Items such as laptops, mobile phones, or tablets that are used for work can be included in salary sacrifice arrangements.
Childcare Fees
Some employers may offer salary sacrifice arrangements for childcare expenses, though this is less common.
Other Fringe Benefits
Depending on the business, other benefits such as professional memberships, school fees, or even housing can be included, but these may attract FBT.

Legal and Financial Considerations

When implementing salary sacrifice in your business, it’s crucial to stay compliant with Australian laws and regulations.

Here are some key points to keep in mind:

1. Fringe Benefits Tax (FBT)

As mentioned earlier, some benefits may attract FBT. It’s important to calculate the FBT implications before offering salary sacrifice options to employees. Consult a tax professional if you’re unsure.

2. Award and Agreement Compliance

Ensure that any salary sacrifice arrangement complies with relevant awards or enterprise agreements. For example, the arrangement cannot reduce an employee’s income below the minimum wage.

3. Superannuation Contributions

Make sure you’re meeting your Superannuation Guarantee obligations. Salary sacrifice contributions are generally in addition to the mandatory SG contributions unless otherwise agreed upon.

4. Record Keeping

Maintain clear records of all salary sacrifice arrangements, including written agreements and payment details. This will help you stay compliant with the Australian Tax Office (ATO) requirements.

Tips for Female Entrepreneurs Considering Salary Sacrifice

Here are some practical tips for incorporating salary sacrifice into your business strategy:

Start with Superannuation
If you’re new to salary sacrifice, start with superannuation contributions. This is a straightforward and tax-effective way to save for retirement.
Educate Yourself and Your Team
Make sure you and your employees understand how salary sacrifice works, its benefits, and any potential drawbacks. Consider holding a workshop or providing written materials to explain the concept.
Consult Experts
Work with an accountant or financial advisor who specializes in small businesses. They can help you design a salary sacrifice program that suits your business needs and complies with Australian tax laws.
Promote the Benefits
If you employ staff, actively promote the benefits of salary sacrifice to them. Highlight how it can help them save on taxes and achieve financial goals.
Keep an Eye on Cash Flow
While salary sacrifice can offer tax savings, it’s important to manage your business’s cash flow carefully. Ensure you have enough funds to cover mandatory contributions and other expenses.

Challenges to Consider

While salary sacrifice offers many benefits, it’s not without its challenges.

Here are some potential drawbacks to keep in mind:

Cash Flow Impact
Salary sacrifice arrangements may impact your business’s cash flow, especially if you’re a sole trader or operate a very small business.
Complexity of FBT
Navigating fringe benefits tax can be complex, particularly for non-superannuation benefits. This is why consulting a tax professional is highly recommended.
Employee Understanding
Employees may not fully understand how salary sacrifice works, which could lead to confusion or mistrust. Clear communication is key to overcoming this challenge.
Legislative Changes
Tax laws and superannuation regulations may change over time, so it’s important to stay informed and adjust your salary sacrifice arrangements as needed.

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Final Thoughts

Salary sacrifice is a powerful financial tool that can benefit both you and your employees. For female small business owners in Australia, it’s an opportunity to reduce tax liabilities, grow retirement savings, and offer attractive benefits to your team. While there are some complexities to navigate, the potential rewards make it a strategy worth considering.

If you’re unsure whether salary sacrifice is right for your business, start with superannuation contributions and consult a financial advisor for guidance. By incorporating salary sacrifice into your business strategy, you can take another step toward building a sustainable and successful business that supports your financial goals—and those of your employees.

Remember, as a female entrepreneur, you have the power to create a business that not only thrives but also empowers others to grow and succeed. Salary sacrifice is just one of many tools that can help you achieve that vision.

If you’re ready to take your business to the next level, our team at Perfectly Organised NT is here to help.

There are many ways of working with professionals. Start small, but keep it regularly and don’t wait until something happens. Strategic planning and periodic reviews are a great start to implement those strategies.

Perfectly Organised NT can assist with a financial review and strategic business planning & management. Find out more!

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Doing Salary Sacrifice as a Small, Female-Owned Business in Australia