What is salary sacrifice

Salary sacrifice is an arrangement between you and your employer to contribute a portion of your salary to your superannuation account before you pay tax on it, instead of it being part of your take home pay. This is an extra amount on top of your employer’s compulsory super contribution.

Investments held in super receive significant tax advantages, both before and throughout retirement. Depending on your current income, sacrificing some of your salary to superannuation could be a tax-effective strategy.

Benefits of salary sacrifice

  • Pay less tax
    If you earn more than $37,000 a year, salary sacrificing could benefit you – both now and in retirement.
    Salary sacrifice contributions are taxed at 15% when they are received by your superannuation fund.1 Because the extra payments are taken out of your salary before you’ve paid income tax, you only pay 15% tax instead of your marginal tax rate (which could be as high as 45% plus the Medicare Levy of 2%).
  • Reduce your taxable income
    In addition to paying a lower rate of tax on your salary sacrificed amounts, the more of your before-tax salary you choose to sacrifice into your super, the lower your taxable income – this could mean paying less at tax time.
  • Grow your retirement savings
    Thanks to the magic of compound interest, making extra contributions to your superannuation can really add up over time and make a big difference to your future lifestyle. For example, by contributing just $20 per week for 30 years, you could add over $85,000 – and only around $30,000 came from your own pocket.2

Kelly case study Case study:
Thirty-year-old Kelly earns $72,500 per year (excluding super), and has arranged for her employer to salary sacrifice $50 per week into her super.

If she makes this before-tax salary sacrifice contribution over a 12-month period, her income tax will decrease from around $16,540 per year to $15,660 per year. While her take-home pay will decrease by around $1,700 over the year, she will contribute over $2,200 into her super – making Kelly $500 better off overall. Continuing to salary sacrifice this amount for the next 35 years could add more than $245,000 to Kelly's balance at retirement.3


calculator
Salary sacrifice calculator

Try our salary sacrifice calculator to find how much you could benefit.


What else to consider

Salary sacrificing can be very tax-effective, but it’s not right for everyone.

  • Make sure you are left with enough in your take home pay to meet your current commitments. There's no point adding extra to your super to save for the future if you leave yourself short today.
  • If you’re on a lower income, you may not get any tax benefits from salary sacrificing. If you earn less than $37,000, consider making after-tax contributions which could make you eligible for a co-contribution from the Australian Government. Find out more about the super co-contribution.
  • There are some limits to how much extra you can put in to your super fund each year. If you go above these limits you may pay extra tax. Find out more about contribution caps.
  • If you work for the Queensland Government, you're likely to be contributing 2%-5% into your super as standard contributions. Standard contributions are normally made after-tax, but you can choose to salary sacrifice them instead. Contact your payroll office if you'd like to arrange this.
  • If you have a Defined Benefit account, salary sacrifice works differently, so read the Defined Benefit Account Guide before making a decision.

How to get started

Simply contact your payroll office to discuss salary sacrificing.

Find out more

To learn more about salary sacrificing, download our Personal Contributions Guide (pdf).