Salary sacrifice into super is one of the most underused tax strategies available to working Australians. The idea is simple: instead of taking part of your salary as income (where it’s taxed at your marginal rate of up to 47%), you redirect it straight into your super fund, where it’s taxed at just 15%. The difference between those two rates is money that stays in your pocket or more precisely, in your retirement account.
Most people either don’t do it at all, set an arbitrary amount without understanding the real impact, or have no idea there’s an urgent catch-up opportunity available right now. This guide covers everything you need to know about salary sacrifice super in Australia in 2026.
What Is Salary Sacrifice Super?
Salary sacrifice into superannuation (also called salary packaging) is an arrangement where you agree with your employer to redirect part of your pre-tax salary directly into your super fund rather than receiving it as take-home pay.
The redirected amount is taxed at 15% inside the super fund as a concessional contribution. Your marginal income tax rate on the same dollar of salary would be 19%, 32.5%, 37%, or 45% (plus 2% Medicare levy) depending on your income. That gap between your marginal rate and 15% is your tax saving.
Salary sacrifice is separate from your employer’s compulsory 12% Superannuation Guarantee contributions. Both types of contribution count toward the concessional contributions cap, but your employer must still pay the full 12% SG on your original salary regardless of any salary sacrifice arrangement you have in place.
Source: ATO: Salary sacrificing super
How Does Salary Sacrifice Super Work in Practice?
Here’s the mechanics in plain terms.
Without salary sacrifice, your employer pays your full salary, you pay income tax at your marginal rate, and the after-tax remainder goes to your bank account. Your employer also pays 12% SG separately into your super.
With salary sacrifice, you and your employer agree in writing that part of your pre-tax salary will go directly to your super fund. That amount never appears in your bank account. It goes to super, where 15% contributions tax is deducted. The result: lower taxable income, lower income tax, and a larger super contribution.
Simple example:
- Salary: $100,000
- Employer SG (12%): $12,000 (this goes to super regardless)
- Concessional cap: $30,000
- Available for salary sacrifice: $30,000 minus $12,000 = $18,000
If you salary sacrifice $18,000:
- Your taxable income drops from $100,000 to $82,000
- You save approximately $6,660 in income tax (at 37% marginal rate, vs 15% inside super = 22 cents per dollar)
- Your super balance gets an extra $18,000 minus 15% contributions tax = $15,300 net contribution
That’s $6,660 in tax savings redirected toward retirement instead of the ATO.
How Much Tax Does Salary Sacrifice Save? By Income Level
The higher your marginal tax rate, the more you save. Here’s how the maths works across common income levels in 2025-26:
| Gross salary | Marginal rate (incl. Medicare) | Tax saved per $10,000 sacrificed |
|---|---|---|
| $45,001 to $120,000 | 34.5% | $1,950 |
| $120,001 to $135,000 | 39% | $2,400 |
| $135,001 to $180,000 | 41% | $2,600 |
| $180,001 and above | 47% | $3,200 |
Source: ATO: Income tax rates 2025-26
Note: Tax savings shown are estimates. Actual amounts depend on your full income picture including investment income, deductions, and other contributions.
For someone earning $120,000, sacrificing $15,600 (the maximum available after $14,400 in employer SG) saves approximately $3,744 in income tax in a single year. Over a decade, that’s tens of thousands of dollars in tax savings alone, before accounting for the compound investment growth on the contributions inside super.
The $30,000 Concessional Contributions Cap
All concessional (before-tax) super contributions count toward an annual cap. For 2025-26, that cap is $30,000 per person.
Concessional contributions include:
- Your employer’s 12% SG contributions
- Any salary sacrifice amounts you add
- Any personal contributions you claim as a tax deduction
To work out how much you can salary sacrifice, subtract your employer’s SG contributions from $30,000. If you earn $80,000, your employer contributes $9,600 (12%). That leaves $20,400 of cap space for salary sacrifice.
If you exceed the $30,000 cap, the excess is included in your assessable income and taxed at your marginal rate, with a 15% offset for contributions tax already paid. You don’t lose the money, but you lose the tax advantage so staying within the cap matters.
Check your current year’s concessional contributions via your myGov ATO account. It shows a running total of what’s been contributed so far this financial year.
Catch-Up Contributions: The Urgent 2026 Opportunity
If you haven’t been maximising your concessional cap in recent years, there’s an important provision you need to know about: catch-up contributions (also called carry-forward contributions).
If your total super balance was below $500,000 at 30 June of the previous financial year, you can carry forward any unused concessional cap space from the previous five years and use it in a single year on top of the standard $30,000 cap.
This is one of the most powerful tax strategies in Australian super, and most people have never heard of it.
The urgent 2026 deadline: Unused concessional cap space from the 2020-21 financial year (when the cap was $25,000) expires permanently on 30 June 2026. Once that date passes, those unused amounts are gone and cannot be claimed. For someone who contributed only their employer’s SG in 2020-21 and has a balance below $500,000, that could be $10,000 to $20,000 of unused cap space available right now, but only until 30 June 2026.
Check your available carry-forward amounts in your myGov ATO account under the superannuation section. If you have unused amounts, consider whether a lump sum salary sacrifice or personal concessional contribution before 30 June 2026 makes sense for your situation.
Scott and Phil covered this strategy as part of a broader super contribution discussion in Episode 7 of the Wealthlab Podcast: “The Superannuation Tax Strategy Most Australians Underuse”. Worth a listen if you want the full picture.
Is 12% Super Included in Salary Sacrifice? Understanding Total Remuneration
One source of confusion is how salary sacrifice interacts with employment contracts structured as total remuneration packages.
If your contract says “salary plus super,” your employer pays 12% SG on top of your stated salary. Your salary sacrifice comes out of your pre-tax salary, reducing your taxable income while your employer’s SG continues on the full original salary amount.
If your contract says “total package inclusive of super,” your 12% SG comes out of the stated total. Salary sacrifice in this case still works the same way mechanically, but your cap space calculation must account for the SG already embedded in your package.
When in doubt, ask your payroll team: “Does my employer pay super on top of my salary, or is it included in the package amount?” This affects how much cap space you actually have available.
Division 293 Tax: High Earners Need to Know This
If your income plus concessional contributions exceeds $250,000 in a financial year, the ATO applies an additional 15% tax called Division 293 tax. This takes the effective tax rate on those contributions from 15% to 30%.
Even with Division 293, salary sacrifice is still worth doing for high earners. Your marginal rate is 47%, so 30% inside super is still significantly better. The benefit is smaller but real.
Division 293 tax is assessed by the ATO after you lodge your tax return. You’ll receive a notice and can choose to pay it personally or have it deducted from your super account.
Source: ATO: Division 293 tax
How to Set Up Salary Sacrifice Super
Setting up salary sacrifice is simpler than most people expect.
Step 1: Check your employer offers it. Most employers do, but not all are obligated to. Ask your payroll or HR team whether salary sacrifice to super is available. If your employer doesn’t offer it, you can achieve a similar tax result by making personal after-tax contributions and claiming a tax deduction, though the process is slightly different.
Step 2: Calculate your available cap space. Take $30,000 minus your employer’s annual SG contributions (12% of your salary). That’s the maximum you can sacrifice. Factor in any carry-forward amounts if eligible.
Step 3: Agree on an amount and get it in writing. Salary sacrifice arrangements must be documented in writing before the relevant salary is earned. You can nominate a fixed dollar amount per pay period or a percentage of salary. Review this annually when your salary changes or at the start of each financial year.
Step 4: Confirm your Tax File Number is on file. Your super fund must have your TFN. Without it, contributions are taxed at 47% which defeats the whole purpose.
Step 5: Monitor your contributions. Check your running total in myGov throughout the year to avoid accidentally exceeding the $30,000 cap.
From 1 July 2026, Payday Super will require employers to pay super contributions with every pay cycle rather than quarterly. This makes it easier to track contributions in real time.
Salary Sacrifice vs After-Tax Contributions: Which Is Better?
Salary sacrifice is a concessional (before-tax) strategy. After-tax contributions (non-concessional) have a separate annual cap of $120,000 and are not taxed entering the fund, since you’ve already paid income tax on that money.
The two strategies serve different purposes. Salary sacrifice is primarily a tax reduction tool: it lowers your taxable income now while building super. Non-concessional contributions are better for moving already-taxed money into the tax-advantaged super environment when you have spare capital (for example, from an inheritance, property sale, or redundancy payment).
Many Australians approaching retirement use both: maximising the concessional cap through salary sacrifice for the annual tax saving, then making additional non-concessional contributions if they have larger lump sums to contribute.
Our superannuation service page covers the full range of contribution strategies in more detail.
How Salary Sacrifice Affects Your Retirement Balance
The tax saving is the immediate benefit of salary sacrifice, but the compounding effect on your super balance is where the real long-term impact shows up.
Every dollar of tax saved through salary sacrifice and invested inside super earns investment returns tax-free in pension phase. A $6,000 annual tax saving invested at 7% per annum over 15 years grows to approximately $155,000.
This is the point Scott makes consistently: the years from 50 to 65 are the highest-impact window for super contributions. Your balance is at its largest, so compound returns generate more dollars. Your income is often at its peak, so the marginal rate gap is widest. And every extra dollar you add has 5 to 15 years to grow before you start drawing on it.
Want to see how salary sacrifice affects your projected retirement balance? Use the Wealthlab super calculator to model different contribution levels against your current balance and retirement timeline.
FAQs: Salary Sacrifice Super Australia
What is salary sacrifice into super?
Salary sacrifice into super is an arrangement where you redirect part of your pre-tax salary into your super fund instead of receiving it as income. The contribution is taxed at 15% inside the fund rather than your marginal income tax rate, which can be up to 47%. The difference is your tax saving. Source: ATO salary sacrificing super.
How much can I salary sacrifice into super in 2025-26?
The concessional contributions cap for 2025-26 is $30,000 per year. This includes your employer’s 12% SG contributions plus any salary sacrifice amounts. To find your available salary sacrifice space, subtract your employer’s annual SG contributions from $30,000. On an $80,000 salary with $9,600 in SG, you have $20,400 available for salary sacrifice.
Does salary sacrifice reduce my taxable income?
Yes. Salary sacrifice contributions are not included in your assessable income for income tax purposes. If you sacrifice $15,000, your taxable income drops by $15,000, which reduces the income tax you pay at your marginal rate.
What is the tax on salary sacrifice super contributions?
Salary sacrifice contributions are taxed at 15% inside the super fund as concessional contributions. If your combined income and concessional contributions exceed $250,000, an additional 15% Division 293 tax applies, making the effective rate 30%. Both rates are still lower than marginal income tax rates for most workers.
Can I salary sacrifice into super if I’m self-employed?
Not through a salary sacrifice arrangement, because that requires an employer. However, self-employed people can make personal concessional contributions to super and claim a tax deduction, which achieves the same tax outcome. You must lodge a Notice of Intent to Claim a Tax Deduction with your fund before lodging your tax return.
What happens if I exceed the $30,000 concessional cap?
The excess amount is included in your assessable income and taxed at your marginal rate, with a 15% offset for the contributions tax already paid by the fund. You won’t lose the money, but you lose the tax advantage on the excess. You can also request to withdraw up to 85% of the excess from your super fund to pay the tax liability.
What are catch-up concessional contributions?
If your total super balance was below $500,000 at 30 June of the previous year and you didn’t use your full concessional cap in prior years, you can carry forward unused amounts from the past five years and make a larger concessional contribution in a single year. Unused cap space from 2020-21 expires permanently on 30 June 2026. Check your available carry-forward amounts in your myGov ATO account.
How does salary sacrifice affect the Age Pension?
Salary sacrifice itself doesn’t directly affect Age Pension entitlements, as the impact depends on your overall asset and income position at retirement. However, increasing your super balance through salary sacrifice over time may affect the Age Pension assets test when you eventually retire. For most people this is a worthwhile trade-off, but it’s worth modelling if you’re close to Age Pension eligibility thresholds.
Does my employer still pay super on my full salary if I salary sacrifice?
Yes. Your employer must continue to pay the 12% SG on your original ordinary time earnings, as if there was no salary sacrifice arrangement. The salary sacrifice is an additional arrangement on top of your SG entitlement.
Salary sacrifice super is one of the clearest, highest-return tax strategies available to working Australians. The concept is simple, the tax saving is real, and setting it up takes one conversation with your payroll team.
The most common mistake is waiting too long to start. Every year you’re not maximising your concessional cap is a year of potential tax savings that can’t be recovered and with catch-up contribution rules, there’s only a limited window to make up for the past.
At Wealthlab, we help Australians in their 50s and 60s structure their super contributions to maximise what they retire with. Book a free 15-minute call to review your salary sacrifice strategy.