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Salary sacrifice lets you direct part of your future pre-tax salary into super. Instead of paying income tax on that amount at your marginal rate, your super fund generally deducts 15% contributions tax. The arrangement must be made in writing before you earn the salary, and every amount sacrificed counts towards your concessional contributions cap alongside employer SG and personal deductible contributions.
That shared cap is where people often miscalculate.
What You Actually Save in Tax
The benefit becomes clearer once you compare the tax payable inside and outside super.
Earn $80,000 and sacrifice $10,000 into super. That $10,000 would've been taxed at your marginal rate of 32%, costing $3,200 in tax plus $200 Medicare levy. Inside super it's taxed at 15%, or $1,500. You keep an extra $1,900 working for retirement instead of handing it to the ATO.
At $130,000, the same $10,000 sacrifice moves from a 39% marginal bracket (including Medicare) down to 15% in the fund. You save $2,400 on the same contribution. The higher your income, the wider that gap gets.
At $200,000 the marginal rate is 47%, so a $10,000 sacrifice saves you $3,200 in tax through the fund. This is also where Division 293 starts to bite. Once your combined income and concessional contributions cross $250,000, an extra 15% tax applies to the concessional contributions above that threshold. The saving is still real, just smaller than the headline gap suggests.
| Salary | Sacrificed | Tax if taken as salary | Tax in super (15%) | Net saving |
|---|---|---|---|---|
| $80,000 | $10,000 | $3,400 | $1,500 | $1,900 |
| $130,000 | $10,000 | $3,900 | $1,500 | $2,400 |
| $200,000 | $10,000 | $4,700 | $1,500 (+ Div 293 if applicable) | ~$1,700 to $3,200 |
Rates are indicative and based on 2025-26 personal tax brackets including Medicare levy.
The Concessional Cap and Why Most People Get It Wrong
Every tax return season, we see people who have sacrificed $30,000 into super because they thought they were safely under the concessional cap. What they had not allowed for was their employer’s super guarantee, which counts towards the same cap. By 30 June, the limit has been exceeded and the excess is added back to their assessable income.
From 1 July 2026 the concessional cap is $32,500. Employer SG at 12% counts toward it. Your salary sacrifice counts toward it. Any personal deductible contribution counts toward it. All three come out of the same $32,500 bucket.
The headroom calculation is simple. Take your ordinary time earnings, multiply by 12%, subtract from $32,500. What's left is your room for salary sacrifice.
On a $100,000 salary, SG is $12,000. Your salary sacrifice headroom is $20,500 for the year. On $150,000, SG is $18,000 and your headroom drops to $14,500. On $200,000, SG hits $24,000 and you've only got $8,500 of concessional room before you're into excess territory.
If you go over the cap, the excess is added to your taxable income and taxed at your marginal rate, with a 15% offset for the tax already paid by the fund. You can elect to release up to 85% of the excess from super to help cover the bill. The extra tax and release process reduce the benefit the contribution was intended to provide. Our guide to concessional vs non-concessional contributions explains how the two contribution types are treated.
Carrying Forward Unused Cap
If you haven’t used your full concessional cap in previous years, you can carry the unused amount forward for up to five years, provided your total super balance was under $500,000 on 30 June of the previous financial year.
Useful in bonus years, when you sell an asset, or if your income jumps. You might have $60,000 or $70,000 of headroom sitting there from earlier years. Worth checking before you assume you're capped at $32,500.
How to Set It Up Without Voiding the Arrangement
The agreement with your employer has to be prospective. That means it applies to salary you haven't earned yet. You can't decide in June that you want to sacrifice May's pay, because May's pay is already earned income and taxed accordingly. Backdate it and the ATO will treat the money as regular salary run through super.
A workable agreement should specify:
- The amount or percentage being sacrificed each pay period
- The start date
- The receiving super fund's details
- A review cadence, usually annually or when income changes
- Whether the arrangement adjusts if you approach the cap
From 1 July 2026, employers must pay super guarantee each payday, and the contribution has to reach your fund within 7 business days. That tightens up the timing significantly. If you're running a fine calculation to hit exactly $32,500, the payday-super rules mean there's less flexibility around 30 June than there used to be.
Your employer needs it in writing. Some payroll systems handle this automatically, some need a form. There's no single ATO-mandated document, but the agreement should be signed by both sides and kept on file.
When It's Not Worth Doing
Salary sacrifice makes less sense in some circumstances, particularly when the immediate tax benefit is small or you may need access to the money.
Low income earners. If you earn under about $45,000, your marginal rate is already close to the 15% contributions tax. Sacrificing saves you almost nothing. The government co-contribution is a better move. Put in $1,000 of after-tax money and the government kicks in up to $500, provided you meet the income thresholds. That's a 50% return before the fund does anything.
People who need the money soon. If you're saving for a house deposit outside the First Home Super Saver Scheme, or you might need cash for a career break, don't lock it in super. Preservation age is a long wait if plans change.
Already at the cap from SG. High earners on $270,000 plus have their SG capped at the maximum contribution base, but their employer SG alone can consume most of the $32,500. Check the numbers before adding sacrifice on top.
Division 293 territory. If you're well over $250,000 combined income, sacrificing still saves tax, just less than the headline suggests. The extra 15% Div 293 tax on those concessional contributions narrows the gap. Usually still worth doing, but run the numbers rather than assuming.
When You Can Actually Access It
Money in super stays there until you meet a condition of release. For most people that's preservation age, which is 60 for anyone born after 1 July 1964. You need to retire, or turn 65, or meet another specific trigger.
For first-home buyers, the First Home Super Saver Scheme provides limited early access to voluntary contributions. Up to $50,000 of those contributions, including salary sacrifice, plus deemed earnings can be released towards a first-home purchase.
Beyond that, treat sacrificed money as gone until preservation age. If you want a sense of what your balance should look like at different life stages, we've written about how much super you should have by age in more detail.
What SMSF Trustees Need to Watch
If you run an SMSF, salary sacrifice creates two separate obligations. The fund has to receive the contribution, and the trustee has to allocate it to the correct member and financial year. Both need to happen inside the right window.
A common timing issue occurs when an employer processes the June payroll on 28 June but the contribution does not reach the SMSF bank account until 2 July. The contribution then counts towards the following financial year. A member expecting to use it against the current year’s $32,500 cap misses that opportunity. Carry-forward room may still be available, but the planned contribution strategy shifts by a year.
From July 2026, the payday-super rules add another timing issue. Employers have up to seven business days to get the contribution into the fund, so money from a late-June pay run may not reach the SMSF until July. Trustees should account for that delay when planning contributions at the beginning of the financial year.
Once the contribution reaches the SMSF, the trustee must allocate it to the correct member and maintain records showing the contribution type and relevant financial year. Poor allocation records are a common issue during an SMSF audit. Our comparison of SMSFs and industry super funds covers the broader trustee obligations if you are weighing up the two structures.
Where an SMSF Accountant Earns Their Fee
Cap breaches are found at return time. That's the problem. By the time we're reconciling contributions in October or November, the year is done and the excess is baked in. The client pays extra tax, we help them elect to release the excess, and everyone wishes they'd looked six months earlier.
A mid-year contribution review takes half an hour and catches these before they happen. If you'd like a second set of eyes on your setup before 30 June rolls around, book your free consult and we'll run the numbers with you.
Frequently Asked Questions
Can I withdraw salary sacrifice super early?
No, not until you meet a condition of release, which for most people means reaching preservation age (60) and retiring. The First Home Super Saver Scheme is the only common exception, allowing up to $50,000 of voluntary contributions to be released for a first home purchase.
Does salary sacrifice reduce my take-home pay dollar-for-dollar?
No. Because the sacrificed amount avoids your marginal tax rate, your take-home drops by less than the amount sacrificed. Sacrificing $10,000 on a $130,000 salary reduces take-home by roughly $6,100, not $10,000, because you would've paid tax on that money anyway.
What happens if I exceed the concessional cap?
The excess is added to your assessable income and taxed at your marginal rate, with a 15% offset for the tax already paid by the fund. You can elect to release up to 85% of the excess from super to help cover the tax bill. Some people also look at whether a super recontribution strategy is useful in later years to clean up the tax components.
Do I need a form to salary sacrifice?
There's no ATO-mandated form. Your employer needs a written agreement signed by both parties, specifying the amount, start date and fund details. Many payroll systems have their own template.
Does salary sacrifice affect my SG entitlement?
Since 1 January 2020, employers must calculate SG on your pre-sacrifice ordinary time earnings. Salary sacrifice can't reduce your employer's SG obligation. Older arrangements that did this are no longer permitted.
Is salary sacrifice worth it on a $70k salary?
Usually yes, but modestly. Your marginal rate is 32% including Medicare, so each dollar sacrificed saves about 17 cents in tax. At lower incomes closer to $45,000, the government co-contribution often beats salary sacrifice for the first $1,000 of voluntary contributions.
General advice only. This article doesn't take your personal circumstances into account. Talk to a licensed adviser or registered tax agent before acting on any of it.
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