How salary sacrifice can add to your super and help you to save on tax
22 March 2024
5
min read
When you work hard for your money, you want to make sure your money is working hard for you. Salary sacrificing may be an effective way to add more to your super and save some money on tax.
New research shows only one in three people feel their super is in a good position for a person their age.* Even more concerning, especially for employers, is that more than 40% admit they spend time worrying about their finances while at work.
With the end of the financial year looming, this can be a great time to think about smart ways to save, and salary sacrificing can be a tax-effective way to grow your super savings for the future.
Along with your employer’s contributions, you can add money to help grow your super. The more money you save in your super during your working life means the more you may have for your lifestyle when you retire.
The earlier you can start putting a little more into your super, the bigger the difference it can make by the time you retire. Salary sacrifice is one of the ways to regularly contribute more money to your super.
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How salary sacrifice works
If you earn more than $45,000 per year, salary sacrificing may help you pay less tax now and have more money for your retirement.
Salary sacrificing means diverting part of your salary into your super before you pay income tax on the money.
The amount you sacrifice from your pay is an extra amount that goes into your super on top of your employer’s compulsory super contribution.
Because the amount of money you sacrifice comes from your pay before you pay tax on it, you pay tax when it goes into your super. But the rate of tax on the amount going into your super is only 15%, or 30% if your income plus before-tax super contributions is more than $250,000. This is instead of your normal tax rate you would pay, which could be up to 45% plus the 2% Medicare levy.
How salary sacrifice can benefit you
Pay less tax – you could pay less tax on the money that goes into super than you would if it stayed in your take-home pay.
Reduce your taxable income – Salary sacrificing from your before-tax salary lowers your taxable income. So you could pay less tax, or use it as part of your transition to retirement.
Grow your retirement savings with the same or more take home pay – Any extra contributions you make now can make a big difference to how much you end up with for retirement.
You should know: There are limits or caps on how much you can contribute to super as before-tax and after-tax contributions. The cap on before-tax contributions, like salary sacrifice, in 2024 is $30,000 plus any unused cap space from the previous 5 years.
How salary sacrifice can work
Jane is a teacher who wants to grow her super but can’t afford to reduce her take-home pay. We show how salary sacrificing might work for Jane depending on the stage of life that she starts salary sacrificing. Here’s a snapshot of Jane’s three case studies:
| |
Case study 1 |
Case study 2 |
Case study 3 |
| Jane’s age |
26 |
40 |
55 |
| Jane’s super balance |
$50,000 |
$150,000 |
$300,000 |
| How much extra Jane decides to put into super |
Jane switches her standard member contributions to before-tax (salary sacrifice) and salary sacrifices the extra amount below. |
| $70 per fortnight |
$100 per fortnight |
$120 per fortnight |
| Does Jane have the same or more in take home pay? |
 |
|
|
| How much more Jane will have in super by age 60 |
$43,782 more |
$31,432 more |
$8,535 more |
How we worked this out: This is a summary of the case studies below. We explain how we worked out these figures, and the assumptions we used, below the case studies.
Jane’s story
Jane's age: 26
Jane's super balance: $50,000
Jane, 26, is a teacher working in Queensland earning $81,000. Jane has an Accumulation account super balance of $50,000. Jane’s employer makes super contributions for Jane of 12.75%. Jane also makes voluntary contributions (previously known as standard member contributions) of 5%, which is the amount that most Queensland Government employees contribute. Jane’s voluntary contributions are after-tax.
Jane decides to switch her voluntary contributions to before-tax (salary sacrifice). Jane also decides to salary sacrifice an extra $70 each fortnight to super. It’s around the amount Jane spends buying takeaway coffee and a morning tea in a fortnight.
Because of the salary sacrifice, Jane will:
- have $205 more per year in take home pay
- grow her super by $940 more a year.
| |
|
Before salary sacrifice |
After salary sacrifice |
Difference |
| Take home pay |
Per fortnight |
$2,251 |
$2,259 |
$8 more |
| Per year |
$58,538 |
$58,743 |
$205 more |
| Net contribution to super p.a1 |
$12,828 |
$13,768 |
$940 more |
| Projected super balance at age 602 |
$636,941 |
$680,723 |
$43,782 more |
Jane's age: 40
Jane's super balance: $150,000
Jane, 40, is a teacher working in Queensland earning $120,000. Jane has a super balance of $150,000. Jane’s employer makes super contributions for Jane of 12.75%. Jane also makes voluntary contributions (previously known as standard member contributions) of 5%, which is the amount that most Queensland Government employees contribute.
Jane switches her voluntary contributions to before-tax (salary sacrifice). Jane also decides to salary sacrifice an extra $100 each fortnight to super. It’s around the amount Jane spends on buying lunches in a fortnight.
Because of the salary sacrifice, Jane will:
- have $367 a year more in take home pay
- grow her super by $1,310 more a year.
| |
|
Before salary sacrifice |
After salary sacrifice |
Difference |
| Take home pay |
Per fortnight |
$3,159 |
$3,173 |
$14 more |
| Per year |
$82,133 |
$82,500 |
$367 more |
| Net contribution to super p.a1 |
$19,005 |
$20,315 |
$1,310 more |
| Projected super balance at age 602 |
$623,084 |
$654,516 |
$31,432 more |
Jane's age: 55
Jane's super balance: $300,000
Jane, 55, is a teacher working in Queensland earning $136,000. Jane has a super balance of $300,000. Jane’s employer makes super contributions for Jane of 12.75%. Jane also makes voluntary contributions (previously known as standard member contributions) of 5%, which is the amount that most Queensland Government employees contribute.
Jane switches her voluntary contribution to before-tax (salary sacrifice). Jane also decides to salary sacrifice an extra $120 each fortnight to super. Jane is looking to add a little extra to super while getting ready to retire.
Because of the salary sacrifice, Jane will:
- have $749 a year more in take home pay
- grow her super by $1,632 more a year.
| |
|
Before salary sacrifice |
After salary sacrifice |
Difference |
| Take home pay |
Per fortnight |
$3,503 |
$3,532 |
$29 more |
| Per year |
$91,093 |
$91,842 |
$749 more |
| Net contribution to super p.a1 |
$21,539 |
$23,171 |
$1,632 more |
| Projected super balance at age 602 |
$426,602 |
$435,137 |
$8,535 more |
How we worked this out
1 We used the Salary Sacrifice Calculator on our website. It’s a guide and is not general or personal advice. Please see the calculator for disclaimers, assumptions and limitations.
2 We used the Super Projection Calculator on our website. It’s a guide and is not general or personal advice. Please see the calculator for disclaimer, assumptions and limitations. Projected results are in today’s dollars. The calculator assumes an investment rate of return of 5.85% p.a. after investment fees and costs, transaction costs and investment taxes. We assume wage inflation of 4.0% p.a. and price inflation (CPI) of 2.5% p.a.
3 These case studies assume no other income, tax deductions or tax offsets.
Find out how salary sacrifice might work for you
Getting started is easy with these 2 steps:
1. Use our Salary Sacrifice Calculator to input your personal details and see how it could work for you.
2. Before you start salary sacrificing, you will need to talk to your employer. Most Queensland Government employees can salary sacrifice via Remserv or Smart Salary.
* Australian Retirement Trust commissioned survey of 1000 Australians, carried out by Ipsos on behalf of Australian Retirement Trust, September-November 2023.