Salary sacrificing into super is one of the more effective tax strategies available to Australian employees, yet plenty of people never get around to using it. The idea is simple: you agree with your employer to direct part of your before-tax salary straight into your super fund, instead of having it paid to you as cash. Because that money is taxed differently, you may end up keeping more of it working for your future. Here is how it actually works.
What salary sacrifice into super means
A salary sacrifice arrangement is a deal you set up with your employer, in writing and before the income is earned. You give up part of your gross (pre-tax) pay, and your employer pays that amount into your super fund as a contribution on top of the normal Super Guarantee they already pay.
The key point is timing. The arrangement has to be in place before you earn the income — you generally cannot retrospectively sacrifice salary you have already been paid. So if you are thinking about it, the time to set it up is now, not at the end of the financial year.
Why it can save you tax
Money you salary sacrifice is generally taxed at the concessional super contributions rate of 15% inside the fund, rather than at your marginal income tax rate. For many people, that marginal rate is well above 15%.
The 2025-26 individual rates (excluding the 2% Medicare levy) are:
- Nil on income up to $18,200
- 16% from $18,201 to $45,000
- 30% from $45,001 to $135,000
- 37% from $135,001 to $190,000
- 45% on income over $190,000
If your marginal rate is higher than 15%, the gap between what you would have paid as income tax and the 15% contributions tax stays invested for your retirement instead of going to the ATO. The higher your marginal rate, the larger that gap generally is. Whether the strategy suits you still depends on your own circumstances, so it is worth running the numbers before you commit.
Mind the concessional contributions cap
This is the part people most often trip over. There is an annual cap on concessional (before-tax) contributions, and for 2025-26 it is $30,000. Crucially, that cap is not just for your salary sacrifice — it includes the compulsory Super Guarantee your employer already pays, which is 12% in 2025-26, plus any personal contributions you claim a tax deduction for.
So before you decide how much to sacrifice, add up everything that counts toward the cap:
- Employer Super Guarantee contributions
- Any salary sacrifice amounts
- Any personal deductible contributions you intend to claim
Going over the cap can create extra tax and unwind the benefit, so the safe approach is to work backwards from $30,000 once you know roughly what your employer will contribute. If your numbers are tight, leave a buffer — pay rises and bonuses can push employer contributions higher than expected.
Carry-forward unused cap
If you have not used your full concessional cap in recent years, you may be able to carry forward the unused portion and contribute more than $30,000 in a single year. This generally applies where your total super balance is under $500,000 at the end of the previous financial year.
Carry-forward rules can be useful in a year where your income spikes — for example, after a large capital gain or a strong year of business profit — but they are detailed and depend on your full super history. It is worth checking your available carry-forward amount with us or through your myGov-linked ATO account before relying on it.
The Division 293 tax for higher earners
If you are a higher earner, there is an extra layer to be aware of. Where your income plus your concessional contributions exceeds $250,000 in a year, an additional 15% tax — known as Division 293 — generally applies to some or all of your concessional contributions.
That does not necessarily mean salary sacrifice stops being worthwhile; even with Division 293, the effective rate on those contributions may still sit below your top marginal rate. But it does change the maths, and it is exactly the kind of situation where personal advice earns its keep, because the answer depends on your total income picture.
Who it tends to suit
Salary sacrifice into super is generally most useful for:
- People comfortable locking money away until they reach preservation age, since super is not accessible until then
- Those on a marginal tax rate above the 15% contributions rate
- Anyone wanting to build their super steadily while reducing tax along the way
It is worth remembering that putting money into super means giving up access to it now, so the arrangement needs to fit your cash flow. Sacrificing so much that you struggle with day-to-day bills usually is not the right call.
A note on advice
Deciding how much to contribute, which contributions to claim, and how super fits your broader plan can cross into financial advice. We can help you understand the tax side and make sure you stay within the concessional cap, and we will point you to licensed financial advice where your wider strategy needs it. The goal is for you to act with the full picture rather than a rule of thumb.
If you would like to work out a sensible salary sacrifice amount for your situation — and check it will not push you over the cap — we are happy to walk through it with you.
Book a chat at nebulaaccounting.au or call 0433 822 227.
This article is general information only and does not take account of your personal circumstances — it is not personal tax, financial or legal advice. Tax laws change and apply differently to different people. Nebula Accounting Pty Ltd is a registered tax agent (No. 26259377); please speak with us or check with the ATO before acting.