Salary Sacrifice & Super

What is Salary Sacrificing?

Salary sacrificing (also known as salary packaging) is an arrangement between you and your employer where you agree to receive less pre-tax income in return for benefits of a similar value. One of the most common benefits to package is additional superannuation contributions.

By contributing to your super from your pre-tax salary, you effectively reduce your taxable income. This means you could pay less income tax while simultaneously boosting your retirement nest egg. You can model this using the main pay calculator.

How Does it Work?

When you salary sacrifice to super, your employer sends the contribution directly to your super fund from your wages before income tax is calculated. These are known as concessional contributions. You can use our superannuation simulator to project the long-term growth of these contributions.

These contributions are taxed at a special rate of 15% within the super fund. For most people, this is significantly lower than their marginal income tax rate, which can be up to 45% (plus the Medicare levy).

By paying 15% tax on your super contribution instead of your higher marginal rate, you are left with more money working for you in your super fund.

Concessional Contribution Caps

There is a limit to how much you can contribute to your super at the concessional tax rate each year. This is known as the concessional contributions cap. This cap includes both your employer's compulsory Superannuation Guarantee (SGC) payments and any salary sacrificed amounts.

Exceeding the cap can result in additional tax, so it's important to keep track of your contributions. You may also be able to "carry forward" unused cap amounts from previous years. Note that salary sacrifice can also impact your HELP/HECS repayment income.