Putting some of your pay into super before it’s taxed is one of the most effective ways to boost retirement savings. Here’s how salary sacrificing works, and the limits you need to know about.
Employers must pay a percentage of their workers’ earnings into superannuation. That compulsory payment, called the superannuation guarantee, rose to 12% of ordinary earnings from July 2025.
On top of that, you can choose to put more of your own money into super. One of the most tax-effective ways is salary sacrificing.
How it works
With salary sacrifice, you arrange with your employer to pay part of your salary into your super fund before income tax is taken out.
Contributions made before tax, including your employer’s compulsory payments and salary sacrifice, are called concessional contributions. They’re generally taxed at 15% when they go into your super fund.
For most workers, that’s lower than their marginal tax rate. Someone earning $100,000 pays 30% income tax on the top part of their income, plus the 2% Medicare levy. By salary sacrificing, part of their income is taxed at 15% instead, so more of it ends up working for them in super.
The cap
There’s a limit on how much you can contribute before tax each year without paying extra tax. The concessional contributions cap rose to $32,500 a year from July 2026, up from $30,000. It includes your employer’s compulsory contributions, so the room left for salary sacrifice depends on your pay.
If your super balance is below $500,000, you can also use unused cap amounts from up to the previous five years, known as carry-forward contributions. That can help people who have had time out of work, or who want to make a larger contribution in one year.
People earning more than $250,000 pay an extra 15% tax on their concessional contributions, known as Division 293 tax.
The trade-offs
Money in super generally can’t be accessed until you reach your preservation age, which is 60, and retire, or turn 65. That makes salary sacrifice less suitable for money you may need sooner, such as a home deposit, although the First Home Super Saver Scheme allows some voluntary contributions to be withdrawn for that purpose.
Salary sacrifice reduces your take-home pay, so it’s important to make sure your budget can handle it.
Low-income earners may get less benefit, because their tax rate may already be close to or below 15%. They may be better off with after-tax contributions, which can attract a Government co-contribution.
Payday super
From July 2026, under new “payday super” laws, employers must pay super at the same time as wages, rather than quarterly. That makes it easier for workers to check that their super, including any salary sacrifice, is being paid on time.
Because the rules are complex and change over time, it’s worth checking the ATO website or speaking with a financial adviser before making large contributions.
