The VERY surprising things you can salary sacrifice – as a young Aussie reveals how she’s beating the cost of living crisis

Aussies can claim childcare costs, school fees and even grocery bills, mortgage repayments and rent as part of a salary sacrificing package to reduce their income tax bill.

Cars are more commonly offered as a fringe benefit to staff – allowing them to have leasing costs subtracted from their pay to reduce their tax.

But the tax office has revealed education and childcare can also be part of a fringe benefits package, along with home loans.

‘Common fringe benefits include: cars, goods, shares, payment of your expenses for loan repayments, school fees and childcare costs,’ it said. 

Aussies working for a charity or a non-profit group are able to claim $15,900 a year on a salary sacrificing package, for major life expenses like mortgage repayments, rent or everyday expenses like groceries.

During a cost of living crisis, Australians are increasingly turning to fringe benefits through their employer. 

Mike Daly, a customer education specialist with novated leasing firm Smartgroup, said salary sacrificing packages were a great way for employers to attract and retain talented staff during a cost of living crisis.

‘It’s an important tool that employers use to try and attract staff,’ he told Daily Mail Australia.

Australians can claim childcare costs and school fees as part of a salary sacrificing package (Prime Minister Anthony Albanese is pictured with children at a Brisbane childcare centre)

‘We’re in a pretty competitive employment market at the moment.

‘While we do see fluctuations in the price of fuel, other things continue to rise like insurance costs – every year they seem to go up regardless of how good a driver I am.’

Aussies working for a charity could claim $15,900 worth of everyday expenses, like groceries and rent, on a salary sacrificing package, and also have a separate package to lease a car.

‘This is where it starts to sound illegal but it’s completely legal,’ Mr Daly explained.

‘The car is a separate benefit for those people who work in not-for-profits – so they could do their $15,900 and they could use that money to pay for their mortgage or rent.

‘Taxman says, “You can have $15,900 tax free – we can’t give it to the employee for no reason; so, they need to give us an expense in their life that is equal to or greater than $15,900”.

‘Typically, people would use the biggest expenses they have which are mortgage or rent but if you don’t have mortgage or rent, it could be just your grocery bills – it’s basically any expense that you have.’ 

Smartgroup keeps track of car leasing and running costs – often paid for with a dedicated card – and liaises with employers so those expenses are taken off an employees taxable income.

Mike Daly, a customer education specialist with Smartgroup, said salary sacrificing packages were a great way for employers to attract and retain talented staff during a cost of living crisis

Instead of getting a car loan directly, Brisbane-based federal public servant Jess Reason, 33, bought a $43,000 LDV T60 four wheel drive ute through salary sacrifice – enabling her to deduct the cost of paying off her vehicle from her pre-tax pay.

The former Suzuki Swift hatch driver bought the ute three years ago during a temporary, 12 month posting to Darwin, and saw the need for a 4WD to visit remote Top End campsites in Litchfield and Kakadu national parks.

‘I wanted something that was really good and sturdy on the road and I wanted to be able to get out and go see the incredible sights there,’ she told Daily Mail Australia. 

‘The Northern Territory has some fantastic sites to see but a little Swift, it wasn’t going to cut it.’

The professional on a low six figure salary is able to have $5,000 subtracted from her taxable income each year covering half the annual $10,000 repayments on her ute bought on finance. She is also able to have halve her ute’s annual running costs subtracted from her salary.

By salary sacrificing her ute and voluntarily contributing $3,000 to super, Ms Reason is able to save $2,000 a year. 

Cars are often paid off over five years through a salary sacrificing arrangement, where the costs of leasing, insurance, registration and running costs are subtracted from someone’s taxable income.

Someone paying off a Toyota RAV4 GXL hybrid, worth $48,810 new, would typically pay it off over five years, via a novated lease.

Jessica Reason, 33, drives a new LDV T60 ute through a novated lease scheme where she is able to deduct the cost of paying off her vehicle and the running costs from her pre-tax salary

After five years, this employee on a salary sacrificing arrangement can either pay the outstanding $14,000 debt on a car financing loan to buy the SUV outright; sell it to pay off the car; or buy a new car with a new novated lease.

For petrol and diesel cars, half the costs of paying off a novated lease and running expenses can be subtracted from someone’s taxable income.

‘For most cars, it would be about half of all of your costs including the finance payments will be taken off your taxable income,’ Mr Daly said.

But the federal government has even more generous deals for those buying a fully-electric car where 100 per cent of the upfront cost can be deducted from someone’s taxable income over several years. 

‘The federal government’s got a new incentive – it’s been around for a couple of years now – for electric vehicles which means if you were to salary package an electric vehicle, it’s now 100 per cent pre-tax,’ Mr Daly said.

‘So, all of your finance payments, all of your electricity, registration, insurance, servicing, tyres – so 100 per cent pre-tax.’

That means someone leasing a BYD Seal, worth $60,000, over three years can deduct the total repayments from their pre-tax salary during that three-year car loan period, along with running costs for things like new tyres, recharging and insurance. 

Salary sacrificing is also allowed for secondhand cars, with brand new cars losing up to a third of their value in the first year.

The Brisbane-based federal public servant on a low, six-figure salary is able to have $10,000 subtracted from her taxable income each year to pay off a $43,000 ute bought on finance

The former Suzuki Swift hatch driver saw the need for a  4WD ute to visit remote Top End campsites

‘We’re finding a lot of people are buying secondhand cars just to try and reduce the upfront costs and the initial rate of depreciation,’ Mr Daly said.

‘If you buy a two-year-old car and save a bit of money, that’s a really good option as well.’ 

Ms Reason’s Chinese-made LDV ute is more than $10,000 cheaper than equivalent dual-cab versions of the Toyota HiLux and Ford Ranger, imported from Thailand. 

‘I wasn’t sure whether or not I would love four-wheel driving as much as I did – that’s why I went with something cheaper in the market,’ she said.

Ms Reason has discovered it’s perfect for camping at Inskip Point north of Noosa.

‘That’s my go to place: I can take the dog, he loves camping – also, I just like going to new places,’ she said.

The Gympie-raised outdoor enthusiast is now planning a spring camping trip to K’gari, formerly known as Fraser Island, by getting a ferry from Inskip Point.

‘I haven’t been there before, again growing up in Gympie crazy; I feel like a traitor to my own area,’ she said.

‘I’m so excited: I’ve wanted to go for years – you need a couple of people to go just so you’ve got that extra support in case you get bogged.

‘I’ve got some friends who are really into four-wheel driving.’

Ms Reason’s five-year lease expires in early 2027 and she is considering selling the LDV ute, with Queensland personalised plates, to pay off the remaining $12,000 debt, known as a balloon payment, before starting a novated lease on a new ute.

‘I’m still undecided on that: I’m probably leaning towards selling and getting into a new lease,’ she said.

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