As a financial adviser I often hear these terms misused, however there is a big difference between the two.
Let us start with salary sacrifice. The term really should be self-explanatory but a lot of people actually confuse it with Salary Packaging. Salary sacrifice means directing some of your pre-tax earnings to your superannuation fund each pay cycle. There it is effectively locked away and access to these funds is not available until a certain time in the future, hence the name salary sacrifice.
Salary packaging is like salary sacrificing in that it also gives you the ability utilise your income before the tax is taken out, the difference is that you have access to the funds now.
Salary packaging is offered by some employers, and most government and not for profit organisations, to give you the ability to pay for certain household expenses with pre-tax income. This allows you to not pay tax on the income used for those expenses, which effectively gives you a larger income per pay cycle. The most common example of this is a car lease (but you should always seek professional advice as to whether salary packaging a new car is in your best interest due to the complexities in the calculations).
When it comes to working these into any financial strategy it is not the case of one over the other. In most cases if a client can salary package, it is quite advantageous for them to implement both strategies. This is because although they both save you tax, each strategy utilises the funds differently. Salary sacrificing is putting money away for your retirement and salary packaging is getting a tax break on expenses you are paying today.
A consultation with a financial adviser will help you understand if either or both of the above strategies would be right for your particular circumstances.
Terrell Hyman the Director and Principal Advisor at Trl Financial Solutions.