The Guides to Social Policy Law is a collection of publications designed to assist decision makers administering social policy law. The information contained in this publication is intended only as a guide to relevant legislation/policy. The information is accurate as at the date listed at the bottom of the page, but may be subject to change. To discuss individual circumstances please contact Services Australia. Deferred income, salary sacrifice, valuable consideration & fringe benefits


This topic provides information on:

  • assessment of deferred income - involuntary
  • salary sacrifice into superannuation - employees
  • salary sacrifice into superannuation - self-employed
  • superannuation contributions under the deeming rules
  • valuable consideration
  • salary sacrifice into fringe benefits
  • fringe benefits: ministers of religion
  • fringe benefits: 'non-grossed-up' and 'grossed up' amounts
  • fringe benefits: 'de-grossing' (adjusting) amounts, and
  • fringe benefits reported on payment summary.

Assessment of deferred income - involuntary

If an employee had no choice over whether or not their income was deferred, income is NOT assessed until he or she received it.

Example: If there was a change to the award and the employee could not receive the income until they resigned or until they took leave in the future, income is not assessed until the employee leaves the job or takes the leave.

For assessment of income that has been determined to have been deferred to gain a social security advantage see

Salary sacrifice into superannuation - employees

From 1 July 2009, an amount of salary or wages voluntarily sacrificed into superannuation IS income for social security purposes.

Prior to 1 July 2009, salary voluntarily sacrificed into superannuation:

  • by those under age pension age was not assessable as income, and
  • by those of age pension age was assessable as income.

Superannuation contributions an employer is required to make under the Superannuation Guarantee, award, collective workplace agreement or superannuation fund rules are NOT assessed as income.

A person 'voluntarily' sacrifices income to superannuation where the person has the capacity to influence the size of the amount contributed or the way in which the contribution is made so as to reduce their assessable income.

Example: Some employees may engage in superannuation salary sacrifice arrangements where:

  • the employer increases the amount contributed to the employee's superannuation fund, and
  • at the same time the employer reduces the employee's wages by the amount contributed to superannuation.

An employee may also have the capacity to salary sacrifice 'member contributions' to their superannuation fund. Member contributions are contributions that an employee is required to make from their taxable income to their superannuation fund, usually a defined benefit fund. These contributions are typically a certain percentage of the employee's income. The employee may have the opportunity to 'salary sacrifice' these contributions to reduce their assessable income.

Salary sacrifice into superannuation - self-employed

For self-employed people, an amount of salary voluntarily sacrificed into superannuation IS income. The amount of salary sacrificed into superannuation is treated as if it were business profits or a wage paid directly to them.

Superannuation contributions under the deeming rules

If a person is over pension age, any contributions made to a superannuation fund after the date of grant add to the balance in the fund as they are made and thus increase the value of the investment that is subject to deeming. This includes contributions made by:

  • the person, or
  • the person's employer (including salary sacrifice arrangements).

Policy reference: SS Guide 4.4.2 Deeming of Financial Investments, 4.8.1 Description of superannuation

Valuable consideration

Valuable consideration (1.1.V.25) received by a person (or their partner) IS treated as income.

Giving an item: If an item is given to a person (or their partner), as valuable consideration, the normal cost of purchasing that item IS assessed as income for the 12 month period from the date the item is received.

Example: If a television is given to a person (or their partner), the purchase price is assessed as income.

Hiring or leasing an item: If an item is provided for a person's (or their partner's) use, the lease or hire fee IS assessed as income for the duration of the lease or hire agreement.

Example: If the television is leased or hired for the person (or their partner), the lease or hire fee is assessed as income.

Exception: There are specific exemptions such as the value of board and lodging. Also exempt is the value of any activity completed as part of an Australian Work Development Order or similar scheme (whereby an individual's fine/s are reduced through unpaid work for an approved organisation, or by undertaking treatment programs and/or educational courses).

Act reference: SSAct section 8(1)-'income amount', section 8(8) Excluded amounts-general

Policy reference: SS Guide 1.1.V.25 Valuable consideration, Income exempt from assessment - legislated

Salary sacrifice into fringe benefits

Fringe benefits are valuable consideration. An amount salary sacrificed into a fringe benefit or set of fringe benefits IS income.

Exception: There are specific exemptions such as the value of board and lodging.

Note: Salary sacrifice into superannuation by employees at any age is income (see 'Salary sacrifice into superannuation - employees').

Act reference: SSAct section 8(8) Excluded amounts-general

Policy reference: SS Guide Income exempt from assessment - legislated

Fringe benefits: ministers of religion

For the income test treatment of ministers of religion see

Fringe benefits: non-grossed-up & grossed-up amounts

Income tax is not paid by employees on fringe benefits they receive. If the non-grossed up value of the fringe benefits received in an FBT year (1 April to 31 March) exceeds $2,000, the grossed-up value of those benefits will be recorded as a separate item on the person's payment summary for the corresponding income year (1 July to 30 June). The taxable value of fringe benefits is grossed-up to ensure the value of fringe benefits is consistent with other types of income reported on the payment summary.

This means the fringe benefits value to be reported on each payment summary will factor in the income tax that would have been paid had the employee been paid in cash salary rather than in fringe benefits. This higher figure is the 'grossed-up' figure, which reflects the gross salary that would have to be paid to purchase the benefit from after tax dollars. The grossed-up value is determined by the employer by using a formula supplied by the ATO.

The non-grossed-up amount of a fringe benefit reflects the actual cost to the employer of the goods or services provided.

Example: If the employer provides a TV costing $200, the non-grossed-up amount is taken to be $200. The grossed-up amount is the amount the employee would have been paid to purchase the TV (i.e. the TV value × ATO multiple).

For social security income test purposes the value of the NON-grossed-up fringe benefits IS to be used.

It is important that the value of all non-grossed-up fringe benefits, whether or not there are any fringe benefits reported on a payment summary, is ascertained for income test purposes.

Act reference: SSAct section 8(1)-'income amount'

Policy reference: SS Guide 1.1.V.25 Valuable consideration

Fringe benefits: de-grossing (adjusting) amounts

Once a person's non-grossed-up fringe benefits per employer exceed $2,000 they become reportable to the ATO. They are then grossed-up and recorded on the person's payment summary.

While for most income support purposes payment summaries are not used (as it is the current need for support that is being assessed), it is likely that the figure most readily available from the employers as 'evidence' of the fringe benefits (valuable consideration) will be the grossed-up figure. Where a person has more than one employer, it is possible that some fringe benefits will be non-grossed-up and some will be grossed-up.

For income test purposes, the value of all non-grossed-up fringe benefits needs to be ascertained regardless of whether or not they appear on a payment summary.

Where a grossed-up amount is provided, a formula for de-grossing (i.e. adjusting) amounts must be used to determine the amount to be assessed as income for social security purposes.

The following formula is used to 'de-gross' (adjust) the grossed-up amount:

  • non-grossed-up fringe benefits = grossed-up value of benefits × (1 − FBT rate).

Fringe benefits: reportable fringe benefits amount

The amount that an employer must report on a payment summary is known as a reportable fringe benefits amount. It is calculated using the formula:

Reportable fringe benefits amount = Individual fringe benefits amount × 1 ÷ (1 − FBT rate)

This is from Fringe Benefits Tax Assessment Act 1986 subsection 135P(2). To get to the individual fringe benefits amount from the reportable fringe benefits amount you have to multiply the reportable fringe benefits amount by (1 − FBT rate). When you put the current FBT rate of 47% into the equation, you get: (1 − 0.47) or 0.53.

Explanation: The FBT rate is set by the Fringe Benefits Tax Act 1986 and is subject to change. The rate for the FBT year ending 31 March 2022 was 0.47. The FBT rate for the FBT year ending 31 March 2023 is 0.47. For further details refer to the ATO website.

Example: For the FBT year ending 31 March 2023, John has received fringe benefits from his employer. The amounts which will be shown on the payment summary for the financial year ending 30 June 2023 are $3,883.50 and $5,825.24, giving a total reportable amount of $9,708.74. To determine the adjusted fringe benefits total apply the previously mentioned formula:

Reportable fringe benefits amount × (1 − FBT rate)
$9,708.74 × (1 − 0.47) = $5,145.63
Note: The individual fringe benefits amount is expressed as a decimal figure.

$5,145.63 is the amount that is taken into account under the income test.

Note: For treatment of reportable fringe benefits amounts under the YA parental income test, refer to

Fringe benefits reported on payment summary

All fringe benefits are not reported on payment summaries although FBT is still payable by an employer on these benefits.

For fringe benefits excluded from the payment summary refer to the ATO's Reportable Fringe Benefits page.

Act reference: SSAct section 1067G-F11 Income components for tax year

Policy reference: FA Guide 3.2.3 Adjusted fringe benefits total

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