Salary sacrifice
Redirecting pre-tax salary into super or a benefit.
Salary sacrifice is an agreement to give up part of your before-tax salary in return for a benefit — most often extra super. Because the money goes in before income tax, contributions are generally taxed at 15% inside super rather than your marginal rate, which can lower your overall tax while building retirement savings.
Sacrificed super counts towards your annual concessional (before-tax) contributions cap, so it’s worth keeping an eye on the limit. The sacrificed amount also comes off your taxable income, which is why the saving shows up twice — less income tax now, and the contribution taxed at 15% inside super instead of your marginal rate.
Worked example
You earn $90,000 and sacrifice $10,000 into super. Your employer’s 12% guarantee adds $10,800, so $20,800 of concessional contributions go in — comfortably under the $32,500 cap. Inside super that’s taxed at 15% ($3,120) instead of your marginal rate, and your taxable income drops to $80,000.
Common mistake
Sacrificing so much that you sail past the concessional cap. Contributions above it are added back to your taxable income and taxed at your marginal rate, which undoes the benefit — count your employer’s guarantee towards the cap, not just what you chose to add.
Grounded in ATO guidance. Figures last checked . General information, not tax advice.
Questions about this term
Salary sacrifice: common questions
- How does salary sacrificing into super lower my tax?
- In two places. The sacrificed amount comes off your taxable income, so you pay less income tax now; and the contribution is taxed at 15% inside super instead of at your marginal rate. Earn $90,000 and sacrifice $10,000: taxable income drops to $80,000, and the $20,800 of concessional contributions going in is taxed at $3,120 inside the fund.
- Do I count my employer’s super when I work out how much to sacrifice?
- Yes — count the employer guarantee, not just what you chose to add. Sacrifice $10,000 on a $90,000 salary and the 12% guarantee adds $10,800, so $20,800 of concessional contributions go in — comfortably under the $32,500 cap. Ignoring the guarantee is how people sail past the limit without noticing.
- Is there a point where salary sacrificing stops saving tax?
- Yes — once you pass the concessional cap. Contributions above it are added back to your taxable income and taxed at your marginal rate, which undoes the benefit for the excess. Under the cap the saving is real; over it, the extra dollars end up taxed as if you had never sacrificed them.
- Is salary sacrifice only for super?
- No — it is any agreement to give up before-tax salary in return for a benefit, and salary packaging is another name for the same arrangement. Extra super is the most common use and the one with the clearest tax outcome, because the contribution is taxed at 15% inside the fund instead of at your marginal rate.
Let Fin handle the jargon for you
Connect your bank and Fin sorts your income, expenses and GST automatically — so terms like this just become numbers that are already worked out. Free to start, no card needed.
Get 2Fin free →