Salary Sacrifice to Super Australia: How It Reduces Your Tax in 2026
Salary sacrificing into superannuation is one of the most straightforward and effective tax-reduction strategies available to Australian employees. By redirecting part of your pre-tax salary into your super fund instead of taking it as income, you pay a flat 15% contributions tax inside the fund rather than your marginal income tax rate — which could be 32.5%, 37%, or 45%. The difference is your tax saving.
What is salary sacrifice to super?
Salary sacrifice (also called salary packaging) involves agreeing with your employer to forgo a portion of your pre-tax salary in exchange for your employer making additional superannuation contributions on your behalf. The redirected amount never appears on your payslip as income — it goes straight to your super fund.
The tax advantage in plain terms:
Without salary sacrifice, your employer pays you a salary, you pay income tax at your marginal rate (up to 45%), and whatever is left goes into your bank account. If you then contribute to super from your after-tax income, you get a tax offset but the process is less efficient.
With salary sacrifice, the contribution is made before income tax is calculated. The super fund pays 15% contributions tax on it. If your marginal rate is 37%, you save 22 cents for every dollar sacrificed.
Salary sacrifice contributions are classified as concessional contributions — the same category as your employer's compulsory Superannuation Guarantee (SG) contributions.
The concessional contributions cap
All concessional contributions — SG contributions from your employer plus any salary sacrifice — are subject to an annual cap. For 2025–26, this cap is $30,000 per year.
If you exceed the cap, the excess is included in your assessable income and taxed at your marginal rate (with a 15% offset for the contributions tax already paid by the fund). You do not get jailed, but you do lose the tax advantage on anything above the cap.
Practical example:
- Your employer pays 11.5% SG on a $100,000 salary = $11,500 in SG contributions
- Remaining cap space: $30,000 − $11,500 = $18,500
- You can salary sacrifice up to $18,500 for the year without exceeding the cap
Carry-forward contributions: If your total super balance is below $500,000, you can also carry forward unused concessional cap amounts from the prior five years and make a larger contribution in a single year.
Tax savings at different income levels
The table below shows the annual tax saving from salary sacrificing $10,000 into super at different income levels (2025–26 tax rates):
| Annual Income | Marginal Rate | Tax on $10k as income | Tax in super (15%) | Annual saving |
|---|---|---|---|---|
| $80,000 | 32.5% | $3,250 | $1,500 | $1,750 |
| $100,000 | 32.5% | $3,250 | $1,500 | $1,750 |
| $120,000 | 37% | $3,700 | $1,500 | $2,200 |
| $150,000 | 37% | $3,700 | $1,500 | $2,200 |
| $180,000 | 45% | $4,500 | $1,500 | $3,000 |
Note: Medicare levy (2%) is not included in the marginal rate figures above but applies in practice.
The higher your income, the greater the benefit. For someone earning $180,000, sacrificing $18,500 into super saves approximately $5,550 in tax per year.
Division 293 tax for high earners
There is a catch for very high earners. If your income plus concessional contributions exceeds $250,000 in a financial year, the ATO applies an additional tax called Division 293 tax. This effectively tops up the 15% contributions tax to 30% on the portion of contributions that takes your combined income and contributions above $250,000.
Example:
- Income: $260,000
- Concessional contributions: $30,000
- Combined: $290,000
- Amount subject to Div 293: $290,000 − $250,000 = $40,000
- Extra tax: 15% × $40,000 = $6,000
Even with Division 293, salary sacrifice is still beneficial for high earners (your marginal rate is 45%, so 30% inside super is still better). But the saving is smaller.
The ATO will issue you a Division 293 notice and you can choose to pay the tax personally or have it deducted from your super fund.
How to set up salary sacrifice
Setting up salary sacrifice is simpler than most people think:
- Contact your employer's payroll or HR department. Ask whether salary sacrifice to super is available and whether there are any deadlines (some employers require agreements to be in place before the start of a pay period).
- Sign a salary sacrifice agreement. This is a written agreement between you and your employer — it's not lodged with the ATO or your super fund.
- Specify the amount. You can nominate a fixed dollar amount per pay period or a percentage of salary. Factor in your employer's SG contributions to avoid exceeding the $30,000 cap.
- Review annually. When your salary changes, or at the start of each financial year, review your arrangement to keep contributions within the cap.
You do not need to notify the ATO or your super fund — the employer reports the contributions in their SG and payroll obligations.
Common questions
Does salary sacrifice affect my take-home pay? Yes. Your gross salary is reduced by the sacrificed amount, so your take-home pay decreases — but by less than the full sacrificed amount, because you are also paying less income tax and Medicare levy.
Does it affect my employer's SG contributions? This depends on whether your employer calculates SG on your ordinary time earnings (OTE) before or after the sacrifice. Under current law, salary sacrifice does not reduce the employer's SG obligation (they must still pay 11.5% on your pre-sacrifice base). But confirm the arrangement in writing with your employer.
Is salary sacrifice right for everyone? It depends on your marginal tax rate, age, and financial goals. The younger you are, the longer the money is locked away in super (preservation age is 60). If you need the cash flow before retirement, consider whether other strategies better suit your situation.