Quick Look
• Focus: How salary sacrificing into super can reduce your tax and boost long-term savings
• Key Takeaways:
Salary sacrificing reduces your taxable income, which may lower your marginal tax rate
You still take home a solid amount — especially at higher income levels
There are limits and traps to watch, like exceeding caps or impacting other entitlements
• Reading Time: ≈ 7 minutes
Introduction
If you’re looking to save tax while building wealth for the future, salary sacrificing into superannuation is one of the simplest strategies available. But it’s not always clear how much you’ll really save — or what it does to your take-home pay.
This article explains how salary sacrifice works, compares tax rates, and helps you avoid common mistakes that can turn a good strategy into a financial headache.
Context & Problem
Australians earning over $45,000 per year can often benefit from salary sacrificing — but many don’t take advantage of it.
Why? Because it’s easy to assume that putting extra into super means less money in your pocket. In reality, the tax savings can make it surprisingly painless — and the long-term boost to your super can be massive.
But there are also some traps: go over the contribution caps, or impact your HECS-HELP repayments or government benefits, and you could undo the benefit.
Strategy & How To
1. What is Salary Sacrifice?
Salary sacrifice (or “salary packaging”) is when you ask your employer to redirect part of your before-tax salary into super instead of paying it as wages.
These are counted as concessional contributions (taxed at 15% inside super)
You can sacrifice up to the $27,500 concessional cap per year, which includes your employer’s SG contributions
2. How It Saves You Tax
Salary sacrificed income avoids your marginal tax rate.
Here’s how the numbers stack up:
*Includes 2% Medicare Levy
3. Example – Take-Home Pay Impact
Suppose Jane earns $90,000 and wants to salary sacrifice $10,000 per year into super.
Without sacrifice:
Gross: $90,000
Tax: ~$20,800
Take-home: ~$69,200
With $10,000 sacrificed:
Taxable income: $80,000
Tax: ~$18,000
Take-home: ~$62,000
Extra in super (after 15% contributions tax): $8,500
So Jane gives up about $7,200 take-home, but gains $8,500 in super — a net benefit of over $1,000, plus the future investment growth.
4. Know the Pitfalls
Contribution Cap Breaches: Employer SG + salary sacrifice must stay under the $27,500 cap
No Refund for Overpayments: Exceed the cap and you’ll pay extra tax — and your fund doesn’t refund it automatically
Impacts on Benefits:
Lower reported taxable income may affect HECS-HELP repayments (which use adjusted income including sacrifice amounts)
Could reduce Centrelink entitlements, especially family tax benefits
Not All Employers Offer It: It’s optional — check your payroll team
Common Questions & Misconceptions
“Does salary sacrifice mean I get paid less?”
Not exactly — your total compensation stays the same. You’re just redirecting part of it into super and paying less tax.
“Can I stop or change it?”
Yes — most employers let you adjust your salary sacrifice agreement during the year, though some may have limits on timing.
“Is it worth it if I earn under $50k?”
Possibly — but the tax savings are smaller. You might be better off using after-tax contributions and claiming the government co-contribution (ATO, updated 2024).
“What if I go over the cap?”
You’ll pay extra tax at your marginal rate on the excess, and may face an interest charge. You can elect to withdraw the excess amount from your super.
Conclusion
Salary sacrificing into super can be a smart way to save tax and build long-term wealth — especially if you’re earning $60,000 or more. The key is staying within the contribution limits and understanding the impact on your take-home pay.
With a bit of planning, even small regular sacrifices can pay off in a big way at retirement.
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Disclosure: General information only. Consider your objectives, financial situation and needs, and seek professional advice before acting.
How We Keep It Trustworthy
Every article includes a Review & Fact Check section below — so you know exactly where our facts come from, what’s uncertain, and whether there’s any bias.
Review & Fact Check
Fact References
• Concessional cap: ATO – www.ato.gov.au (updated 1 July 2024)
• Salary sacrifice rules and tax rates: ATO – Salary sacrificing super
• Income tax rates including Medicare Levy: ATO – Individual tax rates 2024–25
• Contribution tax rate (15%): ATO
Unverified or Inconclusive Items
• Take-home pay calculations are based on simplified estimates and may vary depending on individual tax deductions or offsets
Time Sensitivity
• Contribution caps and tax rates change annually — check each financial year
• SG rate may affect cap usage if it increases mid-year
Bias Assessment
• Neutral, educational tone with promotion of general financial advice services — no product promotion
Super
20th May 2025
Quick Look
Focus: How salary sacrifice into super can reduce your tax and increase long-term savings
Key Takeaways :
Introduction
Salary sacrifice into superannuation is one of the most tax-effective strategies available to working Australians. Done right, it can help you pay less tax now and grow your retirement savings faster.
But like any strategy, it’s not one-size-fits-all. If you earn too little—or too much—or forget to check your caps, it can backfire. Here’s how it works, who it suits, and where the pitfalls lie.
Context & Problem
Australians pay income tax based on marginal tax rates. The more you earn, the more tax you pay on each additional dollar. But salary sacrifice allows you to redirect some of your pre-tax salary into super, where it’s taxed at just 15%—potentially much lower than your usual rate.
The catch?
So, the question becomes: how much can you contribute without hurting your cash flow or
breaching the rules?
If your income is:
Pensioner nil rate Medicare threshold is $43,020 or $45,907 for a family & $59,886 for
family pensioners
Redirecting some of that income into super, where it’s taxed at 15%, can mean big savings.
Example
Lisa earns $100,000.
Tax saved: ≈ $2,000 and $8,500 goes into super
The concessional contributions cap is $30,000 per financial year (ATO, updated 1 July 2024).This includes:
Tip:
If your employer is already contributing $11,500 (11.5% of $100,000), that leaves $18,500
room for extra salary sacrifice.
Step 3: Adjust carefully
Before:
Raj earns $85,000. He’s paying ≈ $18,700 in tax, and his employer contributes $9,775 into super. He’s not making any extra contributions.
After:
Raj starts sacrificing $8,000 per year.
Outcome:
By giving up $100 a week, Raj grows his super faster and pays less tax overall. If Raj is 37, at an net earning rate of 6% pa, that $100 per week grows to $269,000 (in today’s dollars assuming 2.5% inflation) by the time he is 67. As he has given up $156,000 take home pay over that period, he is $113,000 better off.
Won’t I lose access to that money?
Yes—until you reach your preservation age(between 55–60) and retire or meet another release condition. It’s a long-term move.
What if I go over the cap?
Can I stop or change it later?
Is it worth it on a lower income?
Salary sacrifice is a proven way to cut tax and boost your super—especially if you’re in the 34%or 39% tax brackets. The key is to balance the tax savings with your lifestyle needs and always stay under the contribution cap. A little planning now can mean a lot more freedom in retirement.
Thinking about contributing to super from your pre-tax salary?
Money GPS helps you understand how salary sacrifice could improve your long-term position, including:
Available online for $198. Start free and access the advice when you’re ready.
Need Full Scope Financial Planning?
If you think you might need a holistic roadmap that leaves nothing out, consider booking a discovery meeting with a fully licensed Financial Planner.
Book a discovery call with Planning IQ today and take the first confident step towards comprehensive wealth management.
Disclosure: General information only. Consider your objectives, financial situation and needs, and seek professional advice before acting.
How We Keep It Trustworthy
Every article includes a Review & Fact Check section below—so you know exactly where our facts come from, what’s uncertain, and whether there’s any bias.
1. Fact References:
2. Unverified or Inconclusive Items:
3. Time Sensitivity:
4. Bias Assessment:
Fact References:
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