Salary Sacrifice Into Super: How It Works & How Much You Save

Salary sacrifice into super is an arrangement where you agree to have part of your pre-tax salary contributed directly to your superannuation fund instead of receiving it as take-home pay. The benefit is that salary sacrifice contributions are taxed at just 15% inside your super fund, compared to your marginal income tax rate of up to 45% plus Medicare levy.

This creates a significant tax saving, particularly for middle and higher-income earners. For example, if you earn $100,000 and salary sacrifice $10,000 into super, that $10,000 is taxed at 15% ($1,500 in super) instead of approximately 34.5% ($3,450 in income tax plus Medicare levy). You save $1,950 in tax, and the full $8,500 (after 15% contributions tax) goes towards your retirement rather than $6,550 after income tax.

Bottom line? The total of your employer's SG contributions plus your salary sacrifice contributions can't exceed the concessional contributions cap, which is $30,000 per year for 2025-26. If your employer contributes 12% SG on a $100,000 salary, that's $12,000 in employer contributions, leaving room for $18,000 in salary sacrifice before hitting the cap.

Exceeding the cap means the excess is added to your taxable income and taxed at your marginal rate plus an interest charge. However, the carry-forward rule allows you to use unused concessional cap space from the previous five financial years, provided your total super balance is below $500,000. For someone who has not been salary sacrificing, this can mean contributing well above $30,000 in a single year.

Check your unused cap amounts through your myGov account linked to the ATO. Worth double-checking.

Setting up salary sacrifice is straightforward. First, check with your employer's HR or payroll department whether they offer salary sacrifice arrangements — most employers do, though they're not legally required to.

Second, determine how much you want to sacrifice by checking the concessional cap and your employer's SG contributions. Third, complete a salary sacrifice agreement form (provided by your employer) specifying the amount per pay period. Fourth, confirm your super fund details are correct.

So what does this actually mean? Your employer will then reduce your gross pay by the sacrifice amount and contribute it to your super fund before calculating PAYG withholding on the remaining salary. The sacrifice amount will appear on your payslip as a pre-tax super contribution. You can usually adjust or stop salary sacrifice at any time with notice to your employer.

The tax benefit of salary sacrifice depends on the gap between your marginal tax rate and the 15% super contributions tax rate. At $50,000 income (marginal rate 32%), sacrificing $5,000 saves approximately $850 per year.

At $80,000 income (marginal rate 32%), sacrificing $10,000 saves approximately $1,700. At $100,000 income (marginal rate 34.5%), sacrificing $15,000 saves approximately $2,925. At $140,000 income (marginal rate 39%), sacrificing $18,000 saves approximately $4,320.

At $200,000 income (marginal rate 47%), sacrificing $18,000 saves approximately $5,760. Note that for high-income earners with combined income and super contributions exceeding $250,000, Division 293 applies an additional 15% tax on super contributions, reducing the benefit. Use our Salary Sacrifice Calculator to model the exact impact on your take-home pay and super balance at your specific income level.

Salary sacrifice reduces your taxable income, which means slightly less take-home pay — but the reduction is smaller than the sacrifice amount because of the tax saving. Sacrificing $10,000 per year from a $100,000 salary reduces your annual take-home pay by approximately $6,550 (not $10,000), because you would have paid $3,450 in tax on that income anyway.

In plain English: Be aware that salary sacrifice can affect income-tested entitlements. It reduces your HECS-HELP repayment income, potentially lowering or eliminating your compulsory repayment. It can help you stay below the Medicare levy surcharge threshold.

However, some Centrelink payments use adjusted taxable income, which adds back reportable super contributions, so it may not reduce these payment assessments. Check whether your employer calculates SG on your pre-sacrifice or post-sacrifice salary — if on the post-sacrifice amount, your employer super contributions will also decrease.

Salary sacrifice into super is generally a good strategy if you earn above $45,000 (where the tax rate gap becomes meaningful), you can afford a modest reduction in take-home pay, you don't need access to the money before preservation age (currently 60), and you don't have high-interest debt that should be paid off first. If you've credit card debt at 20% interest, paying that off first provides a guaranteed 20% return, which far exceeds the tax benefit of salary sacrifice.

Similarly, if you're saving for a home deposit and need the funds within a few years, salary sacrifice into super locks the money away until retirement (unless you use the FHSSS). The optimal sacrifice amount balances tax savings against your current cash flow needs. Start with a small amount and increase gradually as your income grows.

Use our Salary Sacrifice Calculator to find the right balance.