Salary sacrifice
Get more from your pay through salary sacrifice.
How does it work?
With salary sacrifice, you arrange for your employer to contribute some of your pre-tax salary (or a bonus) into super rather than receiving it as take-home pay.
May be suitable if…
You're an employee.
What are the benefits?
- Grow your super.
- Pay less tax: the contributions are generally taxed at up to 15%¹, instead of your marginal tax rate, up to a maximum of 47%².
Case study
William, aged 45, was recently promoted and has received a pay rise of $5,000, bringing his total salary to $150,000 p.a. He’s planning to retire in 20 years and wants to use his pay rise to boost his retirement savings.
He decides to sacrifice the extra $5,000 into super each year. By using this strategy, he’ll save on tax and get to invest an extra $1,200 each year, when compared to receiving the $5,000 as after-tax salary and investing outside super.
Details |
Receive pay rise as after-tax salary | Sacrifice pay rise into super |
|---|---|---|
Pre-tax pay rise |
$5,000 |
$5,000 |
Less income tax at 39%2 |
($1,950) |
(N/A) |
Less 15% contributions tax |
(N/A) |
($750) |
Net amount invested |
$3,050 |
$4,250 |
| Additional amount invested | $1,200 | |
Important things to consider
- To make salary sacrifice contributions you must be eligible to contribute to super.
- Salary sacrifice contributions count towards the concessional contributions cap and penalties may apply if the cap is exceeded.
- Another way to grow super tax-effectively is to make personal deductible contributions.
- You can’t access your super until you meet a condition of release such as reaching preservation age and retiring.
- Other eligibility conditions apply – see the Australian Taxation Office (ATO) website for more information.
1 Individuals with income from certain sources above $250,000 in 2024/25 will pay an additional 15% tax on salary sacrifice and other concessional super contributions within the cap.
2 Includes Medicare levy.
Got a question?
Get set in the right direction with help and guidance available over the phone, online or face-to-face.
General advice and information only
Any advice and information on this website is general only, and has been prepared without taking into account your particular circumstances and needs. Before acting on any advice on this website you should assess or seek advice on whether it is appropriate for your needs, financial situation and investment objectives.
Tax disclaimer
Any general tax information on this website is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.
Connect with us
Download the MLC app
