Salary sacrifice into super: the complete Australian guide (2025–26)
How the tax saving actually works, whether it beats paying down your mortgage, the carry-forward rules most people miss, and exactly what to say to your employer to set it up.
2025–26 key numbers
Concessional cap
$30,000
per year (incl. employer SG)
Super tax rate
15%
on contributions (not your rate)
SG rate
11.5%
employer must contribute
Carry-forward years
5 years
if balance under $500k
How salary sacrifice actually works
Salary sacrifice is an arrangement where your employer pays a portion of your pre-tax salary directly into your super fund, instead of paying it to you as income. That contribution never appears in your taxable income — so you never pay your marginal rate on it. Instead, the super fund pays a flat 15% contributions tax.
The mechanics are simple: you agree with your employer to redirect, say, $500 per month into super. Your payslip shows a lower gross salary. You pay less income tax on that lower salary. The super fund receives the $500, pays $75 (15%) in contributions tax, and invests the remaining $425.
The tax saving comes from the gap between your marginal rate and 15%. On $90,000 your marginal rate is 32% (plus 2% Medicare levy = 34%). Sacrifice $1,000 into super and you save $340 in income tax but pay $150 in contributions tax — a net saving of $190 on that $1,000. The money isn't gone; it's in super, growing tax-advantaged.
How much you actually save — by income level
The saving per dollar sacrificed depends entirely on your marginal rate. Here's what a $10,000 salary sacrifice saves at different incomes — and what it actually costs your take-home pay:
| Salary | Marginal rate | Tax saved | Super tax paid | Net saving | Take-home cost |
|---|---|---|---|---|---|
| $50,000 | 18%* | $1,800 | $1,500 | $300 | $8,200 |
| $80,000 | 34% | $3,400 | $1,500 | $1,900 | $6,600 |
| $100,000 | 34% | $3,400 | $1,500 | $1,900 | $6,600 |
| $140,000 | 39% | $3,900 | $1,500 | $2,400 | $6,100 |
| $200,000 | 47% | $4,700 | $1,500 | $3,200 | $5,300 |
* At $50,000 the marginal rate is 16% + 2% Medicare = 18%. Net saving is only $300 on a $10,000 sacrifice. The government co-contribution (up to $500 free for incomes under $58k) is often more valuable at this income level.
Tip
Run your numbers
Salary Sacrifice Super Calculator
Enter your salary and see exactly how much you save in tax, what it costs your take-home, and how much extra you'll have at retirement.
Calculate my saving →Salary sacrifice vs paying down your mortgage
This is the most common question — and the answer is genuinely nuanced. Both are excellent uses of spare cash; the right choice depends on your interest rate, marginal rate, and age.
Salary sacrifice wins when:
- ✓Your marginal rate is 34%+ (most effective above $80k)
- ✓Your mortgage rate is below ~6% (super returns historically beat this long-term)
- ✓You're more than 10 years from retirement (compounding needs time)
- ✓You already have an offset account absorbing spare cash
Mortgage wins when:
- ✗Your mortgage rate is high (7%+) — guaranteed return beats uncertain super growth
- ✗You're within 5–10 years of retirement (less compounding time)
- ✗You're on a lower income (marginal rate closer to 15% = minimal tax benefit)
- ✗You need the financial flexibility of accessible equity
A practical approach many Australians use: maintain an offset account as the primary vehicle for spare cash (keeping it liquid and reducing mortgage interest), while salary sacrificing a fixed amount into super each year. This captures the tax benefit of super without locking away all spare cash.
Note
Salary sacrifice vs investing outside super (ETFs)
Investing in ETFs outside super gives you flexibility — you can access the money any time. But you pay your full marginal rate on income and CGT on gains. Super is less accessible but far more tax-efficient.
Inside super, investment earnings are taxed at 15% (not your marginal rate). Capital gains on assets held more than 12 months are taxed at 10% inside super — and critically, this rate is not changing in 2027. The July 2027 CGT changes only apply to assets held personally. Super becomes an even more attractive structure after 2027 for long-term investors.
The trade-off is access. Super is generally locked until preservation age (60 for most people). If you're building wealth toward financial independence before 60, ETFs outside super give you flexibility that super cannot. Most FIRE-focused Australians use both: maximum concessional contributions into super for the tax benefit, and an ETF portfolio outside for the bridge to preservation age.
The carry-forward rule most people miss
Since 2019–20, unused concessional cap from previous years carries forward for five years, provided your total super balance is below $500,000. This means a year of low contributions — a career break, parental leave, or a period of lower income — doesn't permanently cost you tax efficiency. You can catch up later.
Example: you took 12 months off work in 2023–24 and contributed nothing that year. You carry forward $30,000 of unused cap. In 2025–26, your cap is effectively $60,000 (this year's $30,000 plus last year's unused $30,000), assuming your balance is under $500k. You could make a large lump-sum contribution — perhaps from savings, a bonus, or a redundancy payout — and save a significant amount of tax.
Tip
One thing salary sacrifice doesn't do: reduce your HECS repayment
This surprises a lot of people. HECS repayments are calculated on your “repayment income” — which for employees includes your salary before salary sacrifice. The ATO uses reportable fringe benefits and reportable employer super contributions when calculating your HECS obligation. Salary sacrifice into super is treated as a reportable employer super contribution.
So if you earn $90,000 and sacrifice $10,000 into super, your taxable income for income tax purposes is $80,000 — but your HECS repayment is still calculated on $90,000. The income tax saving is real; the HECS impact is not. Use the HECS payoff calculator to see your repayment timeline, and the take-home pay calculator to model the net effect on your pay.
When salary sacrifice isn't worth it
Your income is under $45,000
At the 16% marginal rate (2025–26), the gap between your rate and the 15% super tax is just 1%. On a $5,000 sacrifice you save $50. The government co-contribution scheme — which gives you up to $500 free for after-tax contributions if you earn under $58,445 — delivers far more value per dollar.
You're already at or near the $30,000 cap
Your employer's SG counts toward the cap. At an 11.5% SG rate, a $130,435 salary means your employer is already contributing $15,000 — leaving $15,000 of cap room. At $261,000, the SG alone fills the cap. Check your cap room before arranging more sacrifice.
You need the cash within 5 years
Super is locked until preservation age (60 for most people). If you're saving for a house deposit, emergency fund, or other short-term goal, locking extra money into super creates a liquidity problem. The exception is the First Home Super Saver scheme, which allows withdrawal of up to $50,000 in concessional contributions for a first home purchase.
You're close to retirement and already have a large balance
Once your super balance exceeds $1.9 million (the transfer balance cap), excess amounts can't be moved into a pension account at retirement and lose their tax-exempt pension phase status. Very large balances also face Division 296 tax (an extra 15% on earnings above $3 million from 2025–26). High balance holders should model their contributions carefully.
How to actually set it up (5 minutes)
Most people overcomplicate this. It's usually a single email to your payroll or HR team.
Work out your sacrifice amount
Check your current SG contributions (11.5% of salary). Subtract from $30,000 to find your cap room. Decide how much to sacrifice — you can always change it later.
Email HR or payroll
You don't need a formal form. A simple email works: "Hi [name], I'd like to set up a salary sacrifice arrangement of $[X] per [week/fortnight/month] into my super fund [fund name, member number]. Can you arrange this from my next pay cycle? Please confirm the arrangement in writing."
Confirm the arrangement in writing
Your employer must document the arrangement before it starts — they can't apply it retrospectively. Most payroll systems do this automatically. Check your first payslip after it starts to confirm the sacrifice amount shows correctly.
Verify with your super fund
Log into your super fund's portal after the first contribution to confirm it arrived as a concessional contribution. It should appear labelled as an employer contribution.
Run your numbers
Salary Sacrifice Super Calculator
Enter your salary and see exactly how much you save in tax, what it costs your take-home, and how much extra you'll have at retirement.
Calculate my saving →Frequently asked questions
Does salary sacrifice reduce my HECS repayment?
No — and this catches people out. HECS repayments are calculated on your 'repayment income', which for most employees includes your salary before any salary sacrifice. The ATO uses your income for surcharge purposes, not your taxable income, for HECS. So sacrificing $10,000 into super reduces your income tax but does not reduce your HECS repayment for the year.
What happens if I exceed the $30,000 concessional cap?
Excess concessional contributions are included in your assessable income and taxed at your marginal rate, with a 15% offset to account for the tax already paid by the fund. You also pay an excess concessional contributions charge on the amount. The ATO will send you an excess contributions determination — you can either pay the tax from your own pocket or elect to release up to 85% of the excess from your super fund.
Can my employer refuse to offer salary sacrifice?
Legally, employers with 10 or more employees are generally required to offer salary sacrifice arrangements under the Fair Work framework, but the specifics depend on your enterprise agreement or contract. In practice, most medium-to-large employers offer it — you just need to ask HR or payroll. Some smaller employers may decline due to administrative complexity.
Is salary sacrifice worth it if I'm planning to buy a home soon?
It depends on whether you're using the First Home Super Saver (FHSS) scheme. If you are, salary sacrificing into super can help build your deposit while saving tax — you can withdraw up to $50,000 in concessional contributions for a first home purchase. If you're not using FHSS, locking money into super when you need it liquid for a deposit in the next 1–3 years is generally not worth the restriction.
Does salary sacrifice affect my employer's superannuation contributions?
It depends on your employment contract. Some employers calculate their Superannuation Guarantee (SG) on your 'ordinary time earnings' before salary sacrifice, meaning your SG stays the same. Others calculate it on post-sacrifice salary, which could reduce your SG slightly. Check your contract or ask HR — it should be clearly stated. Most large employers calculate SG on pre-sacrifice salary.
Can I salary sacrifice into super if I'm self-employed?
If you're a sole trader or in a partnership, you don't have an employer to make salary sacrifice arrangements with. However, you can make personal deductible contributions to super — which achieve the same tax outcome. You claim a deduction on your tax return for contributions you make, and the fund pays 15% contributions tax. The $30,000 concessional cap applies to both salary sacrifice and personal deductible contributions combined.
This guide is general information only — not personal financial or tax advice. Tax outcomes depend on your individual circumstances. Consult a registered tax agent or financial adviser before making decisions based on this content.