Salary sacrifice super is an arrangement where you ask your employer to redirect part of your pre-tax salary directly into your super fund. Instead of receiving that portion as take-home pay and paying income tax on it, the money goes into super and is taxed at just 15% — well below the marginal tax rate most working Australians pay.
It is one of the simplest and most effective ways to reduce your tax bill while building retirement savings at the same time. For anyone earning above $45,000 a year, the tax saving is meaningful. For higher earners, it can be substantial.
How Salary Sacrifice Super Works
When you salary sacrifice into super, the money flows like this:
- Your employer calculates your gross pay as normal
- Instead of paying the sacrificed amount to you as wages, your employer contributes it directly to your super fund
- Your taxable income is reduced by the sacrificed amount — you pay income tax on the lower figure
- The contributed amount is taxed at 15% inside your super fund (or 30% if your income plus contributions exceeds $250,000 — see Division 293 below)
The net effect is that you receive less take-home pay, but your super balance grows faster and your income tax for the year is lower.
What Salary Sacrifice Is Not
- It is not deducted from your take-home pay and sent to super. The arrangement must be set up before the income is earned — you cannot retroactively sacrifice wages already paid.
- It does not reduce your employer’s SG obligation. Your employer still pays the full 12% SG on your ordinary time earnings, in addition to any salary sacrifice amount.
- It is not the same as a personal deductible contribution. Salary sacrifice is handled by your employer; personal deductible contributions are made directly by you from your bank account with a separate ATO notice.
The Tax Saving — By Income Bracket
The benefit of salary sacrifice depends entirely on the gap between your marginal tax rate and the 15% contributions tax inside super.
Effective Tax Rates (FY2025–26, including 2% Medicare levy)
| Taxable Income | Marginal Rate (incl. Medicare) | Super Contributions Tax | Tax Saving per $1,000 sacrificed |
|---|---|---|---|
| $18,201 – $45,000 | 21% | 15% | $60 |
| $45,001 – $135,000 | 34.5% | 15% | $195 |
| $135,001 – $190,000 | 39% | 15% | $240 |
| $190,001 – $250,000 | 47% | 15% | $320 |
| Over $250,000 | 47% | 30% (Div 293) | $170 |
For someone earning $80,000, every $1,000 salary sacrificed into super saves $195 in income tax compared to receiving it as wages.
Dollar Example — $80,000 Salary
| No salary sacrifice | Sacrifice $10,000/year | |
|---|---|---|
| Gross salary | $80,000 | $80,000 |
| Salary sacrificed | $0 | $10,000 |
| Taxable income | $80,000 | $70,000 |
| Income tax + Medicare | ~$18,067 | ~$14,617 |
| Tax saving | — | ~$3,450 |
| Super contributed (SG) | $9,600 | $9,600 |
| Super contributed (sacrifice) | $0 | $10,000 |
| Contributions tax (15%) | — | $1,500 |
| Net super added | $9,600 | $18,100 |
Approximate figures based on FY2025–26 resident tax rates. Does not account for the low income tax offset (LITO) or other offsets.
The Concessional Cap — Your Limit
Salary sacrifice contributions are concessional contributions. They count toward the annual concessional cap of $30,000 (FY2025–26), along with your employer’s SG contributions and any personal deductible contributions.
Before deciding how much to sacrifice, check how much cap space you have:
- Your employer’s SG = 12% of your ordinary time earnings
- Available cap space = $30,000 minus your SG contributions
Example at $80,000 salary:
- SG = $80,000 × 12% = $9,600
- Available for salary sacrifice = $30,000 − $9,600 = $20,400
If you sacrifice more than your remaining cap, the excess is taxed at your marginal rate (less a 15% offset) and an interest charge applies. Track your contributions through myGov or your fund’s portal during the year.
If you have unused cap from prior years and your total super balance is below $500,000, you may be able to sacrifice above the standard annual cap using the carry-forward rule. See our guide on concessional super contributions for details.
How to Set Up Salary Sacrifice
Setting up salary sacrifice is straightforward, but it must be done correctly to be effective.
Step 1 — Check Your Employer Offers It
Not all employers offer salary sacrifice arrangements, though most medium and large employers do. Ask your payroll or HR department whether it is available. If it is not offered, you can still achieve a similar outcome through personal deductible contributions.
Step 2 — Calculate How Much to Sacrifice
Work out your available concessional cap space (as above) and decide how much to redirect. Consider:
- How much take-home pay you can afford to reduce
- Whether you are approaching the $30,000 cap when SG is included
- Whether your income might change during the year (bonus, promotion, variable commissions)
It is generally safer to sacrifice a conservative amount and top up at year-end via personal deductible contributions if you have remaining cap space.
Step 3 — Make a Written Request to Your Employer
Submit a salary sacrifice request in writing — either via your employer’s formal form (if they have one) or a simple letter or email to payroll. The request must be made before the wages are earned. You cannot retrospectively salary sacrifice pay you have already received.
Your written request should specify:
- The dollar amount or percentage to sacrifice each pay cycle
- The fund the contributions should be directed to
- The effective start date
Step 4 — Confirm It Is Working
After the first pay cycle, check that:
- Your payslip shows the reduced taxable income
- A contribution appears in your super fund account (super is reported to your fund, though contributions may take a week or two to appear)
Log in to your super fund’s portal or use myGov/ATO Online to track contributions.
Step 5 — Review Annually
Review your salary sacrifice amount each financial year — particularly if your salary has changed or if the concessional cap changes. You may also want to adjust if you are using carry-forward contributions in a particular year.
Salary Sacrifice and the SG — The Loophole That Was Closed
Prior to 1 January 2020, some employers used salary sacrifice contributions to reduce the base on which they calculated SG — effectively reducing the SG they were required to pay. This was a legal loophole at the time.
From 1 January 2020, this loophole was closed by legislation. Employers must now calculate SG on your ordinary time earnings before salary sacrifice is deducted. Your salary sacrifice arrangement cannot reduce your SG entitlement.
This means the 12% SG your employer owes you is calculated on your full ordinary time earnings, regardless of how much you salary sacrifice on top.
Division 293 — High Earner Surcharge
If your income (including concessional contributions) exceeds $250,000 in a financial year, the ATO levies an additional 15% tax on your concessional contributions — called Division 293 tax. This brings the effective tax on those contributions to 30%.
Even at 30%, salary sacrifice is still beneficial for high earners, because 30% is well below the top marginal rate of 47% (including Medicare levy). The saving per $1,000 sacrificed is $170 — still meaningful at scale.
Division 293 is assessed after you lodge your tax return. You can elect to pay it from your super balance or from personal savings. If you choose to pay from super, the ATO will deduct the amount directly from your fund.
Salary Sacrifice vs Personal Deductible Contributions
Both methods achieve the same tax outcome — directing pre-tax money into super — but there are differences in how they work:
| Salary Sacrifice | Personal Deductible Contribution | |
|---|---|---|
| Made by | Employer (on your instruction) | You (directly from bank account) |
| Timing | Each pay cycle, throughout the year | Anytime, including up to 30 June |
| Payroll impact | Reduces taxable income on payslip | No payroll change — deduction claimed at tax time |
| ATO notice required | No | Yes — Notice of Intent to Claim Deduction |
| Flexibility | Fixed until you change the arrangement | Can vary amount anytime |
| Good for | Employees with access to salary sacrifice | Self-employed, contractors, or top-up contributions |
Many people use both: a regular salary sacrifice arrangement throughout the year, and a top-up personal deductible contribution before 30 June if they have remaining cap space.
Is Salary Sacrifice Worth It?
For most Australians earning above $45,000, the answer is yes — salary sacrifice into super is worth considering, particularly if:
- You have spare cash flow and don’t need the full take-home pay
- You are in the 34.5% tax bracket or higher (the saving per $1,000 is $195+)
- You want to accelerate your super balance before retirement
- Your employer pays SG on top of your salary (not included in a total remuneration package)
It is less compelling if:
- You are in the lowest tax bracket (21%), where the saving per $1,000 is only $60
- You are close to the $30,000 concessional cap from SG alone (high salary)
- You have short-term financial needs (mortgage, school fees) where cash flow is tight
- Your employer deducts super from a total package — in that case, sacrificing more into super simply reduces your take-home pay with no additional super entitlement
Frequently Asked Questions
Can I change or stop salary sacrifice at any time? Generally yes, though your employer may have a minimum notice period or require changes to coincide with a pay cycle. Check your employer’s policy. You can reduce, increase, or stop the arrangement with reasonable notice.
Does salary sacrifice affect my annual leave and other entitlements? Your leave entitlements are calculated on your full ordinary-time-earnings rate before salary sacrifice — not your reduced income. Salary sacrifice does not reduce your leave accrual, termination payments, or other employment entitlements. This is confirmed by the Fair Work Act.
Will my take-home pay reduce by exactly the amount I sacrifice? No — it reduces by less than the sacrificed amount. Because the sacrifice reduces your taxable income, you also pay less PAYG withholding tax. The net take-home reduction is roughly the sacrifice amount minus your marginal tax rate saving.
Can I salary sacrifice if I have a HECS-HELP debt? Yes, but be aware that salary sacrifice does not reduce your HECS-HELP repayment obligation. HECS repayments are calculated on your “repayment income”, which the ATO defines as your taxable income plus reportable fringe benefits plus reportable employer super contributions (which includes salary sacrifice super). Salary sacrificing into super will increase your reportable employer super contributions and therefore may increase your HECS repayment rate.
What is a “reportable employer super contribution”? Salary sacrifice super contributions are reported on your payment summary (income statement) as a reportable employer super contribution (RESC). This figure is used in various ATO calculations — including the income tests for family payments, HECS repayments, and some Centrelink benefits. It is not additional taxable income, but it does count toward certain thresholds.
For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.