Salary Sacrifice Super: How to Pay Less Tax and Retire Richer in 2025-26
Salary sacrificing into superannuation is one of the most effective legal tax strategies available to Australian employees. You divert a portion of your pre-tax salary into super, pay 15% contributions tax instead of your marginal rate, and grow your retirement savings faster. Here is exactly how it works — with numbers.
What Is Salary Sacrifice Into Super?
Salary sacrifice (also called salary packaging for super) is an arrangement where you ask your employer to redirect a portion of your gross salary directly into your superannuation fund before income tax is applied. The redirected amount is taxed at 15% inside the fund — the concessional contributions tax rate — rather than at your personal marginal income tax rate, which can be up to 47% (including Medicare levy).
Salary sacrifice contributions count as concessional contributions — the same category as your employer's Superannuation Guarantee (SG) payments. For 2025-26, the concessional contributions cap is $30,000 per year (up from $27,500 in 2023-24 following indexation).
How Much Tax Do You Actually Save?
The tax saving depends on your marginal tax rate. For every $1,000 you salary sacrifice:
| Taxable Income | Marginal Rate | Tax Without Sacrifice | Super Tax (15%) | Saving Per $1,000 |
|---|---|---|---|---|
| $45,001–$135,000 | 34.5% (inc. Medicare) | $345 | $150 | $195 |
| $135,001–$190,000 | 39% (inc. Medicare) | $390 | $150 | $240 |
| $190,001+ | 47% (inc. Medicare) | $470 | $150 | $320 |
A nurse earning $90,000 who salary sacrifices $10,000/year saves approximately $1,950 in income tax. A senior engineer earning $200,000 sacrificing $10,000 saves $3,200 per year.
Real Example: $85,000 Salary, $10,000 Sacrifice
Consider someone earning $85,000 who decides to sacrifice $10,000 into super:
- Before sacrifice: Taxable income = $85,000. Income tax = $19,717. Medicare levy = $1,700. Take-home = ~$63,583.
- After sacrifice: Taxable income = $75,000. Income tax = $16,342. Medicare levy = $1,500. Take-home = ~$57,158.
- Reduction in take-home: $6,425/year (not $10,000 — the tax saving offsets $3,575).
- Super grows by: $10,000 − $1,500 contributions tax = $8,500 net added to your fund.
You give up $6,425 in take-home pay to add $8,500 to super. That's a 32% bonus on every dollar sacrificed, before investment returns.
The 2025-26 Concessional Cap and Carry-Forward Rule
The annual concessional contributions cap is $30,000 for 2025-26. This includes your employer's SG contribution (12% of salary for 2025-26) plus anything you salary sacrifice. If your total super balance was below $500,000 on 30 June 2024, you can carry forward unused cap space from up to 5 previous years and make a larger contribution in a single year — a powerful catch-up option for those who paused contributions.
What Salary Sacrifice Does Not Cover
- Salary sacrifice does not increase your employer SG base (in most cases). Your employer's SG is typically calculated on your pre-sacrifice salary, but always confirm with your employer — some calculate SG on the reduced salary.
- It does not affect your leave entitlements in most enterprise agreements.
- Income tested Centrelink benefits (if applicable) may be affected by changes to taxable income.
How to Start Salary Sacrificing
- Check your current concessional contributions year-to-date in your myGov account (ATO online services).
- Calculate how much cap space remains: $30,000 minus employer SG already paid.
- Submit a salary sacrifice agreement to your payroll or HR team. Most employers will accommodate from the next pay cycle.
- Monitor your super fund statement to confirm contributions arrive correctly.
Use the Salary Sacrifice Calculator to model your specific tax saving and net pay change before submitting the agreement.
Frequently Asked Questions
- Can I salary sacrifice if I'm self-employed?
- No — salary sacrifice is an arrangement between an employee and employer. Self-employed individuals make personal concessional contributions instead and claim a tax deduction under s290-180 of ITAA 1997.
- Does salary sacrifice affect my home loan borrowing capacity?
- Yes. Lenders assess your taxable income, which is lower after salary sacrifice. If you're applying for a mortgage in the near future, discuss this with your broker before starting a sacrifice arrangement.
- Is there a minimum amount I need to sacrifice?
- No minimum set by law. Practically, most payroll systems process salary sacrifice in whole-dollar amounts per pay period. Even $50 per fortnight makes a meaningful difference compounded over a career.