6 Things To Understand About Salary Sacrifice by newtohr

6 Things To Understand About Salary Sacrifice

Think about your annual salary. With this income, you may dream about the places you could go, goals you could accomplish, or assets that you could accommodate. However, the reality may be quite different when you analyze your funds each month. Although federal and state taxes are both necessary and useful, they do eat up a large percentage of the money that you have coming in on an annual basis. For this reason, people often have difficulty accomplishing their goals. With this reality, many employers have implemented salary sacrifice in order to help individuals accomplish their personal goals. In this article, we will share six things to understand about salary sacrifice.

1. Understand the Definition

You may still be wondering, “What is salary sacrifice?”

This is a new concept that is being implemented by business groups across the nation. With this arrangement, individuals work with their employers to utilize their pre-tax salary in order to purchase something that they typically would have purchased with their taxed income dollars.

2. Why Would You Use This Practice?

This practice is used to benefit both employees and employers. Employees benefit from this arrangement because they are receiving more net funding to use towards their goals. If they choose to move forward with this setup, they will be receiving less money in their regular paycheck.

Employers are not only building rapport with their team, they are creating loyal workers and the potential for various tax breaks.

3. You Can Use This Method for Many Purchases

Once your employer agrees to test this arrangement, there are many products to consider integrating into this program. In some cases, people choose to sacrifice monthly childcare fees and loan payments. In other instances, people contemplate utilizing this method for both car and property purchases.

4. Look Out for Tax Implications

In reality, it is important that this deal is conducted correctly so that you do not incur any unexpected tax implications. Specifically, there is a fringe benefit tax that can complicate the arrangement for a business if they do not structure the method adequately.

5. There Are Downsides

When you use salary sacrifice techniques to purchase a large asset, the product is not technically in your full responsibility. Although you still have full access and responsibility over this valuable asset, you are not in full ownership because there is still a debt that is owed. In addition to ownership liabilities, your taxes will be convoluted because of the complicated nature of this deal. Lastly, many employees are not open to testing this solution.

6. This Can Be Used for Work-Related Expenses

In many cases, businesses solely use this arrangement for work-related expenses that are incurred by their team members. From PPE to tools to technology, this practice can be implemented to save money in the long run.


There are many practices on the market that must be handled with care in order to work effectively. Although salary sacrifice is ultimately effective, it is important to analyze the holistic nature of the situation to determine if this is the most efficient solution. When you take time to think about your income and taxes, you will likely need to enlist the help of a professional who has extensive knowledge of the subject.

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