The ATO specifies that a super salary sacrifice arrangement is a formal arrangement between an employer and an employee where the employee agrees to forgo part of their future entitlement to salary or wages.

The golden rule to remember is that an arrangement should be confirmed and entered into before the applicable work is performed.

Can you salary sacrifice unused leave on termination?

The short and most common answer is no.

Accrued leave entitlements are deemed part of salary and wages that have already been earned and therefore you are unable to salary sacrifice it.

However, let’s not move on just yet. If an employee was to have a written arrangement in place prior to the leave accruing then this would be an instance where it can be salary sacrificed on termination.

It is important to note that only the portion that was accrued after the arrangement was put into place can be salary sacrificed.

What else do you need to consider?

Upcoming bonuses, commissions and incentives follow the same rule above. An arrangement would need to be put into place prior to the work that was required to earn these allowances.


Information provided in this article is general information, not legal advice and should not be relied upon as such. HR Expert Australia and Definitiv (the author) does not accept liability for any loss or damage arising from reliance on the content of this article.

This article was originally posted on Definitiv, one of Australia’s leading cloud-based payroll and HR software products. To view the original article, click here.