What is salary sacrifice?
Salary sacrifice (or a before-tax contribution) is an easy way to make extra payments into your super. On your instruction, your employer sends a portion of your before-tax salary into your super account.
Salary sacrifice at a glance
Your employer redirects a portion of your before-tax salary to your super account.
Before-tax contributions can help you to pay less tax on your take home pay.
Salary sacrifice will count toward your before-tax contribution cap.
Salary sacrifice is easy to set up by notifying your employer.
Salary sacrifice explained
Salary sacrifice might not sound like fun, but it's a useful tool to:
- Pay less tax on your take home pay
- Grow your super balance quicker for the future
Watch the video to find out more about salary sacrifice
Lower tax rate
If you make super contributions through salary sacrifice, these contributions are taxed at a maximum at 15%. For higher income earners, extra tax will apply if your total income and super contributions are more than $250,000.
When super is paid from your before-tax salary, your taxable income is lowered. And the higher your tax bracket, the less tax you pay on the money that's salary sacrificed to super.
Increase your super balance
Over time, you'll enjoy the benefit of compounding returns in your super. And as your super grows, you'll see how even little extra contributions now, can mean a lot to your savings at retirement.
How salary sacrifice can save on tax^
- Sam earns $60,000 a year and sacrifices $100 from his pay each month to super
- By salary sacrificing $100, Sam has an extra super contribution of $85 and only $15 goes to tax
- If Sam took that $100 as salary, he’d pay $32 in tax* and be left with $68, but no boost to his super.
^ Examples are for illustrative purposes only.
* Marginal tax rate of 30%, plus Medicare levy of 2%.
1. Complete the Salary sacrifice form
- Decide how much of your salary (either an amount or a percentage) you would like to set up as salary sacrifice each pay period. Using the contributions calculator can help.
- Download and complete the Salary sacrifice form (PDF).
2. Give the form to your employer
- Give your completed form to your employer or payroll team. They will set up your salary sacrifice for you, according to your instructions on the form.
What will happen if I exceed my before-tax contributions cap to super?
Amounts above your before-tax or concessional contributions cap are counted towards your assessable income and so will be taxed at your marginal income tax rate, less a 15% tax offset. See more at the ATO.
Any amounts above the concessional contributions cap that you don’t withdraw will also count towards your after-tax (non-concessional) contributions cap.
How do I claim a tax deduction for salary sacrifice?
Since your contributions are made by your employer and not with after-tax money, you wont need to claim a tax deduction for any sacrificed amount contributed through your employer. Instead, you should see a reduced taxed amount in your pay slip.
Salary sacrificed amounts are included as reportable employer super that count toward certain income tests used for working out benefits, concessions and offsets.
Does salary sacrifice count towards my contributions cap?
The amount you salary sacrifice does count towards your concessional contributions cap. Your super guarantee also counts towards this cap so be mindful of your limits. For more information read the Making super contributions fact sheet (PDF).
Try the calculator
Use the retirement income estimate calculator to find out if the Government Age Pension plus your super will give you enough income in retirement.
Find a webinar
Join an online education session to find out more about extra super contributions.
Get advice
Our Advice team is here to help you work through your options and answer your questions about contributions.