Salary sacrifice means you ask your employer to pay some of your pay into your super before it is taxed as income. It is one of the most common ways to add to your super.
How it works
Normally you are paid, you pay income tax, and you keep what is left. With salary sacrifice, part of your pay goes straight to your super fund instead. That money is called a concessional (before-tax) contribution, and the fund pays 15% tax on it.
Your employer's own super guarantee payments are concessional contributions too. For 2026-27 the super guarantee is 12% of your ordinary time earnings.
Who saves tax
The saving is the difference between your own tax rate and the 15% the fund takes.
| Your tax rate on the next dollar (with Medicare levy) | Roughly saved on each $1,000 sacrificed |
|---|---|
| About 17% | Close to nothing |
| About 32% | About $170 |
| About 39% | About $240 |
| About 47% | About $320 |
If your tax rate is low, there is little saving. People on higher incomes gain most. Use the super contributions calculator with your own numbers.
The cap
There is a yearly limit on before-tax contributions, called the concessional contributions cap. For 2026-27 it is $32,500. Your employer's contributions count toward it, so you can only sacrifice what is left.
If you go over, the extra is taxed at your usual rate, so you lose the benefit. Keep your employer's contribution, your salary sacrifice and any personal contributions you claim as a deduction together under the cap.
If you did not use all of the cap in earlier years and your total super balance was under $500,000 on the previous 30 June, you can use unused amounts from up to five previous years. See caps and carry-forward explained.
Things to think about
- Your money is locked in. You generally cannot get your super until you reach your preservation age and retire. For people born after 30 June 1964, that is 60.
- Take-home pay falls. Check you can afford it.
- Fees and investments matter. More money in a high-fee fund is not always better.
- Rules change. Check the ATO before you start, and ask a tax adviser if your situation is complicated.
A simple way to decide
- Work out your employer's contribution and your room under the cap.
- Check your tax rate on the next dollar.
- If it is well above 15%, sacrificing some pay may save tax.
- Choose an amount you will not miss, and stay under the cap.
To see how it adds up over time, try the super calculator.
Super contributions and salary sacrifice See your room under the cap and the tax you could save.Sources
This article is for education and is not financial, tax or legal advice. Figures are checked against the sources above and may change. Read the full disclaimer.