How Salary Sacrifice Into Super Works
Salary sacrifice means agreeing with your employer to have a portion of your before-tax salary paid into your superannuation instead of to you as income. The contribution is taxed at 15% inside the super fund (the concessional contributions tax) instead of at your marginal income tax rate (up to 45%). The difference between your marginal rate and 15% is your tax saving. Salary sacrifice reduces your assessable income — which also reduces your Medicare levy and may affect HECS repayment thresholds.
Tax Savings by Income Level — 2025-26
| Salary | Marginal Rate | $5k Sacrifice Saves | $10k Sacrifice Saves | $20k Sacrifice Saves |
|---|---|---|---|---|
| $50,000 | 19% + 2% | $300 | $600 | $1,200 |
| $80,000 | 32.5% + 2% | $975 | $1,950 | $3,900 |
| $120,000 | 37% + 2% | $1,200 | $2,400 | $4,800 |
| $180,000 | 45% + 2% | $1,600 | $3,200 | $6,400 |
| Plus contributions are invested in super — compounding over decades | ||||
The Concessional Contributions Cap — 2025-26
Total concessional (before-tax) super contributions are capped at $30,000 per financial year for 2025-26. This includes your employer's SG contributions. For example: if your employer pays $10,350 SG on a $90,000 salary (11.5%), you can salary sacrifice a further $19,650 before hitting the cap. Exceeding the cap means the excess is taxed at your marginal rate plus an excess contributions charge — so staying within the cap is important.
Carry-Forward Unused Cap Amounts
If your super balance is below $500,000, you can use unused concessional contribution cap amounts from the previous 5 financial years. This means if you've contributed less than $30,000/year in the past, you can contribute more in future years to catch up. This is a powerful strategy for people who had low incomes or career breaks in earlier years and now want to boost their super rapidly.
When Salary Sacrifice Makes Most Sense
- You are in the 32.5%+ tax bracket — the savings are most meaningful above $45,000 income
- You are more than 10 years from retirement — time for compound growth
- You have no high-interest debt (paying 20%+ credit card interest first is usually better)
- Your employer passes on the full sacrifice (confirm they don't reduce your SG contribution)
- Your fund is in a suitable growth option appropriate for your time horizon
Frequently Asked Questions
Does salary sacrifice reduce my employer's super contributions?
It should not, but some employers have historically reduced SG contributions when employees salary sacrifice. From 1 January 2020, employers are legally required to pay SG on your ordinary time earnings regardless of salary sacrifice arrangements. Always confirm with your payroll department.
Can I salary sacrifice into any super fund?
You can salary sacrifice into any complying superannuation fund. Your employer must pay into a fund you're eligible to join. The Your Future, Your Super reforms mean you generally keep the same fund when changing employers, which ensures consistency.
Is salary sacrifice better than making personal after-tax contributions?
For most people, salary sacrifice (pre-tax) is more tax-effective than personal after-tax contributions because contributions are taxed at 15% instead of your marginal rate. However, personal after-tax contributions may attract the government co-contribution (up to $500 for low-medium income earners) and are counted differently for tax purposes.