Income tax: what are the tax implications of a 'salary sacrifice' for an employee?

A 'salary sacrifice' occurs if an employee forgoes part of the salary he or she would otherwise receive, in return for other benefits.

In a salary sacrifice: - the employee's income tax is based on the reduced amount of salary; - tax instalment deductions are based on the reduced amount of salary; - the benefit received is not subject to income tax in the hands of the employee; and - the employer may be subject to fringe benefits tax on the value of the benefit.