Salary sacrifice
Redirecting pre-tax salary into super or a benefit.
Salary sacrifice is an agreement to give up part of your before-tax salary in return for a benefit — most often extra super. Because the money goes in before income tax, contributions are generally taxed at 15% inside super rather than your marginal rate, which can lower your overall tax while building retirement savings.
Sacrificed super counts towards your annual concessional (before-tax) contributions cap, so it’s worth keeping an eye on the limit. The sacrificed amount also comes off your taxable income, which is why the saving shows up twice — less income tax now, and the contribution taxed at 15% inside super instead of your marginal rate.
Worked example
You earn $90,000 and sacrifice $10,000 into super. Your employer’s 12% guarantee adds $10,800, so $20,800 of concessional contributions go in — comfortably under the $32,500 cap. Inside super that’s taxed at 15% ($3,120) instead of your marginal rate, and your taxable income drops to $80,000.
Common mistake
Sacrificing so much that you sail past the concessional cap. Contributions above it are added back to your taxable income and taxed at your marginal rate, which undoes the benefit — count your employer’s guarantee towards the cap, not just what you chose to add.
Grounded in ATO guidance. Figures last checked . General information, not tax advice.
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