Salary sacrifice into super and investing outside super (in shares, ETFs, or other assets) are two of the most common ways Australians build long-term wealth beyond their automatic employer contributions. Each has distinct tax treatment, accessibility, and strategic trade-offs.
This guide compares the two approaches for Australian workers — using general figures, not personal advice.
How They Work
Salary Sacrifice Into Super
You instruct your employer to direct a portion of your pre-tax salary into your super fund before income tax is calculated. That amount is then taxed at the super contributions tax rate of 15% (rather than your marginal income tax rate).
The contribution stays in super until you meet a condition of release — generally retirement at age 60.
Annual cap: Concessional (pre-tax) contributions are capped at $30,000 per year in FY2025–26, including employer SG contributions (11.5%). Any amount above the cap is assessed at your marginal tax rate.
Investing Outside Super
You receive your salary (after income tax and Medicare levy), then invest the after-tax amount in shares, ETFs, managed funds, or other assets — typically through a brokerage account.
Investment returns (dividends, interest, capital gains) are then taxed at your marginal rate (with the 50% CGT discount applying to capital gains on assets held more than 12 months).
Tax Comparison
On the Way In (Contribution)
| Approach | Tax Rate |
|---|---|
| Salary sacrifice into super | 15% contributions tax |
| Investing outside super | Income tax + Medicare levy first (e.g. 34.5% for $80k income) |
For someone earning $80,000, $10,000 salary sacrificed into super costs them approximately $8,500 in take-home pay (they save ~$1,950 in income tax). Investing $10,000 outside super would require approximately $6,550 in after-tax income at the 34.5% rate — meaning the same $10,000 invested outside super costs more in gross income.
On Investment Returns (While Growing)
| Approach | Tax on Returns |
|---|---|
| Accumulation super account | 15% on earnings and net capital gains |
| Pension phase (post-retirement) | 0% — completely tax-free |
| Outside super (in a share portfolio) | Marginal rate on dividends and interest; 50% CGT discount on capital gains |
For a 37% taxpayer, investment returns outside super are taxed at 37% (or 18.5% with the CGT discount on long-term gains). Inside super, those same returns are taxed at 15% (or 0% in retirement phase). Over 20–30 years, this difference compounds substantially.
On the Way Out (Withdrawal)
| Approach | Tax at Withdrawal |
|---|---|
| Super — after age 60 | 0% — completely tax-free |
| Super — between preservation age and 59 | 0% up to $235,000 low-rate cap; 15% above |
| Outside super — shares | CGT applies (50% discount if held >12 months) |
Access — The Key Trade-Off
Super: Locked until preservation age (60 for those born after 30 June 1964) and a condition of release. You cannot access it early for most reasons — even if you face financial difficulty, early access is restricted to very specific circumstances.
Outside super: You can sell your shares or ETFs at any time. The only friction is brokerage fees and tax on any capital gain. This liquidity is valuable for financial flexibility.
The access restriction is the fundamental reason why some Australians choose to invest outside super — particularly those who have financial goals before age 60 (home deposit, business, travel, education).
Practical Comparison — $10,000 Annual Extra Investment Over 25 Years
The following uses illustrative figures for comparison purposes only. Actual returns will vary, and the comparison does not constitute financial advice.
Assumptions: 7% gross annual return on both; 34.5% marginal rate for outside super; 15% super earnings tax; 25-year period; no access to super during that period.
| Salary Sacrifice into Super | Investing $6,550 (after-tax) Outside Super | |
|---|---|---|
| Annual gross contribution | $10,000 | $10,000 (but $6,550 after tax) |
| Effective after-tax earnings rate | ~5.95% (15% tax on 7%) | ~5.32% (34.5% tax on 7%; 50% CGT discount assumed) |
| Access during 25 years | No | Yes |
| Approximate result after 25 years | Higher (tax advantage compounds) | Lower (higher ongoing tax drag) |
These are simplified illustrative figures. The actual outcome depends on your specific tax rate, return, contribution mix (concessional vs non-concessional), and the CGT profile of your outside-super investments. Past performance is not a reliable indicator of future performance.
When Salary Sacrifice Tends to Win
- You are in a higher marginal tax bracket (32.5%+) — the tax saving on contributions is material
- You are within 10–20 years of retirement — the access restriction matters less
- Your emergency fund and near-term financial goals are already funded
- You have capacity within the $30,000 concessional cap — the tax benefit only applies to capped amounts
When Investing Outside Super Tends to Win
- You need access to the money before age 60 (home deposit, business, parental leave funding)
- You are on a low income and the tax saving on super contributions is minimal (below $45,000 income, the marginal rate is only 21%)
- You don’t trust super to be accessible in the future (political risk of rule changes)
- You want to invest in assets not available inside super (e.g. direct real estate outside an SMSF)
- You have used your concessional cap and additional contributions would be non-concessional (taxed already at your marginal rate before entering super)
A Combined Approach
Many financial planners suggest a combined approach: maximise concessional super contributions to reduce taxable income, then direct any remaining savings capacity to outside-super investments for liquidity. This gives you the tax efficiency of super while maintaining flexibility through accessible savings.
Frequently Asked Questions
What if I max out my $30,000 concessional cap — should I then go outside super? Once the concessional cap is exhausted, any further super contributions would be non-concessional (after-tax, no additional deduction). In that case, the comparison shifts — you are comparing 15% earnings tax inside super vs marginal rate outside, but without the contribution tax advantage. For high earners near the cap, this comparison is closely balanced.
Can I do both in the same year? Yes. Salary sacrifice into super for the tax benefit, and invest separately for liquidity. Many Australians use this approach — redirect pre-tax income into super up to the cap, and invest any surplus after-tax income in a brokerage account.
Is the super tax benefit guaranteed to last? Super tax rules are set by legislation and can change. Historically, Australia has maintained the basic structure of super’s concessional tax treatment, but contribution caps have been adjusted and some concessions (like the tax-free status of TTR earnings) have been reduced over time. There is no guarantee the current rules will apply throughout your entire working life.
See also: Super Strategies. For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.