Salary Sacrifice to Super: How Much Should You Do?

01 What salary sacrifice does

Salary sacrifice sends part of your pre-tax pay into super, where it is taxed at 15% instead of your marginal income-tax rate. For Cass on the 39% bracket — 37% plus the 2% Medicare levy — every $1,000 sacrificed is taxed $150 in super instead of $390 as salary. A $240 saving, before the money has earned anything.

The contribution is concessional, meaning before-tax, and that is what triggers the 15% rate. The saving is not a one-off: it repeats on every dollar, every pay cycle, for as long as the arrangement runs, and the amount not paid in tax stays invested and compounds alongside everything else.

It is worth being precise about what the 24c gap is and is not. It is not a return — the money is not earning anything by being taxed less. It is a permanent reduction in the cost of getting a dollar into super, which is why it compounds: $1,000 of salary buys $850 inside super instead of $610 outside it, and it is the larger starting balance that grows.

Source: ATO — Salary sacrificing super

02 How much you can sacrifice

Your limit is the concessional cap minus your employer's Super Guarantee. The cap is $30,000 for 2024-25 and it counts SG, salary sacrifice and any personal deductible contributions together — one cap, three sources.

On $145,000, Cass's SG at 11.5% is about $16,675, leaving roughly $13,300 of room. That is the number to sacrifice against, and it moves: the SG rate has been rising, so the room left for voluntary contributions shrinks each year even when the cap does not change and your salary does not either.

Exceeding the cap is not catastrophic but it is expensive. The excess is added back to your assessable income and taxed at your marginal rate, with an interest charge on top, and you then choose whether to release the excess from super or leave it. Because SG is paid quarterly and bonuses are unpredictable, the common way to breach is accidental — a bonus in June that carries its own SG. Leaving a small buffer under the cap costs a few dollars of tax saving and avoids the whole mechanism.

If your total super balance was under $500,000 at the previous 30 June, unused cap from the past five years is available too, which raises the ceiling substantially in a high-income or windfall year.

Source: ATO — Concessional contributions cap

03 Worked example: tax saved by bracket

The value of salary sacrifice is the gap between your marginal rate and 15%. At the 39% bracket that's 24c per dollar; at 32% it's 17c; at 47% it's 32c. Put your amount and rate in to see this year's saving.

On the defaults above, the worked example shows: That is 24c saved per dollar — taxed at 15% in super instead of 39%.

04 When it stops paying off

Salary sacrifice pays off less in three specific cases, and each has a clear threshold rather than a judgement call.

Above $250,000 of combined income and concessional contributions, Division 293 charges an extra 15% on those contributions, taking the rate inside super to 30%. Against a 47% marginal rate that still leaves a 17c gap, so the strategy survives — but it is roughly half as good, and worth re-checking against paying down non-deductible debt.

At low incomes the gap runs the other way. In the 16% bracket there is barely a cent between your marginal rate and 15%, and the Low Income Super Tax Offset may already refund the contributions tax on your employer's contributions. Below about $45,000 the co-contribution — 50c from the government per after-tax dollar — is worth several times what sacrificing saves, which reverses the usual advice entirely.

The third case is not about tax at all. Money sacrificed into super is preserved until 60 and a condition of release. If there is a realistic chance you will need it before then — a deposit, a career break, a business — the lock costs more than the 24c saves, and no amount of tax efficiency fixes not being able to reach your own money.

Source: ATO — Division 293 tax

05 How to set it up

Salary sacrifice is an arrangement with your employer to redirect part of your pre-tax pay into super before it is taxed, so it has to be set up prospectively — on income you have not earned yet. It cannot be backdated, and pay that has already been earned cannot be retrospectively sacrificed.

Ask payroll to start or change the amount, then watch the running total so SG plus sacrifice stays under the $30,000 cap across the year. Two things commonly go wrong: a mid-year pay rise lifts SG and quietly eats the room you were sacrificing into, and a June bonus arrives with its own SG attached. Both are avoided by reviewing the arrangement once, around February, rather than setting it in July and forgetting it.

If your employer will not offer salary sacrifice, or your income is lumpy enough that a fixed arrangement does not fit, a personal deductible contribution reaches the identical 15% outcome by a different route: contribute from your own after-tax money, then claim the deduction. That path has one extra step that is easy to miss — you must lodge a notice of intent with your fund and receive their acknowledgement before lodging your tax return. Miss it and the contribution stands but the deduction is gone, which is the worst of both.

The wider question of whether the money should go to super at all, rather than the mortgage, is worked through in Mortgage vs Super: Where Should Your Spare $10,000 Go.

Source: ATO — Salary sacrificing super