Salary Sacrifice Super: How It Work , Limit & Tax Benefit

A quiet superpower in your payslip: salary sacrificing into super lets you redirect pre-tax salary into your retirement fund at 15% tax, but only if you navigate the $30,000 cap and the $250,000 threshold. This guide explains the mechanics, limits, tax savings, and trade-offs so you can decide if it works for you.

Concessional contributions cap (2024‑25): $30,000 per year ·
Tax rate on salary sacrifice contributions: 15% within cap ·
Maximum marginal tax rate avoided (top bracket): 45% + 2% Medicare levy ·
Division 293 threshold: $250,000 adjusted taxable income ·
Preservation age (born after July 1964): 60

Here are the key figures to keep in mind when considering salary sacrifice.

What is a super salary sacrifice?

In essence, salary sacrificing into super means you ask your employer to take some of your before‑tax pay and put it straight into your super fund. The Australian Taxation Office calls it a type of salary packaging or total remuneration packaging. It’s on top of the compulsory Superannuation Guarantee (SG) your employer already pays, currently set at 11.5% of your salary.

How salary sacrificing to super works

• You and your employer agree to a reduced before‑tax salary; the sacrificed amount is paid into your super fund.
• These contributions count as concessional (before‑tax) contributions and are taxed at 15% inside the fund.
• The money is then invested and generally can’t be accessed until preservation age (usually 60).

Example of a salary sacrifice arrangement

Suppose you earn $100,000 and decide to sacrifice $10,000. Your taxable income drops to $90,000, saving you tax at your marginal rate (32.5% + 2% Medicare levy). The $10,000 goes into super and is taxed at 15% – a net saving of roughly $1,950 in tax each year.

The pattern: salary sacrifice delivers immediate tax relief, but you give up access to those funds until retirement.

How much can I salary sacrifice to super per year?

The real limit isn’t a percentage of salary – it’s the annual concessional contributions cap. For 2024‑25, that cap is $30,000, as confirmed by the Australian Taxation Office. This cap includes all employer SG contributions, salary sacrifice amounts, and any after‑tax contributions you later claim as a tax deduction.

Concessional contributions cap 2024‑25 and 2025‑26

• 2024‑25: $30,000 (indexed up from $27,500).
• 2025‑26: Not yet announced; expected to rise with AWOTE.
• If you exceed the cap, the excess is taxed at your marginal rate plus an interest charge.

Carry-forward unused cap rules (balance under $500,000)

If your total super balance was below $500,000 on 30 June of the previous year, you can carry forward unused cap amounts from up to five earlier years. This is particularly useful if you’ve had a break from work or want to make a large catch‑up contribution.

Division 293 tax for high‑income earners

Once your income plus before‑tax contributions exceeds $250,000, an additional 15% tax applies to your concessional contributions – turning the effective rate to 30%. MLC notes this can significantly reduce the tax benefit for high earners.

The implication: the concessional cap is the real governor of how much you can salary sacrifice, and high earners lose half the benefit above $250,000.

Is it a good idea to salary sacrifice into super?

The answer depends on your income, how close you are to retirement, and your cash‑flow needs. Below we lay out the case for and against.

Who benefits most and who should reconsider

People in the 32.5% tax bracket or higher – especially those with dependants who won’t need the cash soon – are the strongest candidates. Low‑income workers, those nearing retirement with large balances, and anyone relying on the money for near‑term expenses should reconsider.

The implication: salary sacrifice is a powerful tool for long‑term wealth, but it demands a long time horizon and enough savings outside super to cover life’s surprises.

How much tax will I save if I salary sacrifice?

Your tax saving equals the difference between your marginal tax rate (including the 2% Medicare levy) and the 15% contributions tax. For a typical worker earning $100,000, the marginal rate is 32.5% + 2% = 34.5%, so the saving on each dollar sacrificed is 19.5 cents.

Tax rate comparison: salary sacrifice vs. take-home pay

The gap between your marginal rate and 15% determines the saving.

Example calculation for a $100,000 salary

Sacrificing $10,000 saves $1,950 in tax, as shown in the table below.

Can you salary sacrifice 100% of salary?

Technically, there is no law stopping you from sacrificing your entire salary – but practical limits quickly apply. The concessional cap of $30,000 is the real ceiling; anything above is taxed at your marginal rate plus interest. You also cannot sacrifice below the National Minimum Wage or your award’s minimum wage, because your employer must still pay the Super Guarantee on your full salary.

Legal and practical limits on salary sacrifice percentage

Mercer Super advises that most employers set a maximum sacrifice percentage – commonly 50% – as a policy to avoid payroll complexity and to ensure the employee still receives enough take‑home pay to cover tax and other obligations.

Concessional cap as the true limit

Even if you sacrifice 100% of your salary, only the amount up to $30,000 (plus any carry‑forward) is taxed favourably at 15%. The rest is treated as excess contributions and taxed at your marginal rate – effectively wiping out the benefit. The Australian Taxation Office makes clear that salary sacrifice contributions count toward this cap.

Minimum wage and award requirements

Under the Fair Work Act, you cannot sacrifice salary in a way that leaves you with less than the relevant minimum wage. Your employer also must pay the Super Guarantee (11.5% in 2024‑25) on your full salary – including the sacrificed portion – meaning salary sacrifice does not reduce your employer’s SG obligation.

Salary sacrifice super vs. after‑tax voluntary contributions: comparison

Choosing between salary sacrifice and after‑tax voluntary contributions hinges on tax timing and access to the government co‑contribution. Below is a side‑by‑side look.

The pattern: salary sacrifice gives you an upfront tax deduction but counts toward a smaller cap; after‑tax contributions give you more room and may unlock government co‑contributions, but don’t reduce your current tax bill.

Steps to set up salary sacrifice super

1. Check your super balance and cap position. Log into your ATO myGov account or your super fund to see your concessional contributions for the year and your total super balance (to determine carry‑forward eligibility).
2. Estimate your tax saving. Use the example above or run a salary sacrifice calculator to see the net benefit.
3. Contact your employer’s payroll or HR department. Request a salary sacrifice agreement – many employers have a standard form. Specify the amount or percentage you want to sacrifice.
4. Confirm the arrangement in writing. The agreement should state the new salary amount (pre‑sacrifice) and that the sacrificed portion goes to your nominated super fund. Keep a copy for your records.
5. Monitor your contributions. Check your payslips and super fund account each quarter to ensure you’re on track and not exceeding the cap.
6. Adjust as needed. You can usually increase, decrease, or stop the arrangement – but check your employer’s policy. Some require a fixed term.

What’s next: key considerations

The Autumn Budget 2025 introduced a proposal to tax the earnings on super balances over $3 million at 30% (up from 15%). If legislated from 1 July 2025, this will directly affect high‑balance members who also salary sacrifice. For those with balances well below $3 million, the change is irrelevant, but it signals a policy direction that could tighten further.

Also, keep an eye on the 2025‑26 concessional cap indexation – expected later this year – and make use of the carry‑forward rules if your super balance is under $500,000. Missing the cap can be costly.

Further insights from experts

Salary sacrifice is a simple way to boost your super and reduce your taxable income. Your sacrificed amount will be taxed in the fund at 15% – generally lower than your marginal tax rate.

AustralianSuper (industry super fund operator)

The real power of salary sacrifice is the tax arbitrage – paying 15% rather than your marginal rate. But it only works if you’re disciplined enough not to need the money before retirement.

MLC (wealth management firm)

For low‑income earners, salary sacrifice can actually result in paying more tax than if the money had been taken as salary. You need to run the numbers carefully.

Mercer Super (super fund provider)

For a typical Australian earning between $60,000 and $180,000, salary sacrifice offers a clear financial advantage – a tax saving of up to $3,200 per $10,000 sacrificed. The caveat: you surrender immediate access to that money. For someone with a mortgage, dependants, or near‑term cash needs, the trade‑off may not be worth it. The decision is clear: if you can afford to lock the money away and your marginal rate is above 15%, salary sacrifice is a low‑effort way to grow your retirement savings faster. If you need liquidity or are in a low tax bracket, consider after‑tax contributions or no extra contributions at all.

Frequently asked questions