Salary sacrifice into super

Salary sacrifice is one of the simplest ways available to add to your super from your pre-tax salary. This means it will generally be taxed at 15% inside super instead of at your marginal income tax rate. This can help you pay less tax while saving for your long-term future.

Salary sacrifice lets you grow your super using pay before tax is taken out. 

This means it will generally be taxed at 15% inside super instead of at your marginal income tax rate. 

For many Australians, it’s one of the simplest ways to build retirement savings and reduce tax at the same time.

This page explains what salary sacrifice into super actually is, how the tax benefit works, how much you're allowed to contribute, and how to set it up with your employer, step-by-step. 

It's general information only – not personal financial or tax advice – so consider your own circumstances or speak to a licensed financial adviser before you go ahead.

A salary sacrifice arrangement is a formal agreement between you and your employer.

You nominate an amount or percentage of your future salary to be paid into super rather than to your bank account, and your employer's payroll handles the rest. Four points matter:

• It’s at the employer’s discretion. Employers may agree to enter into a salary sacrifice arrangement with you, but they are not required to do so. Check with your employer first.
• It must be set up in advance. You can't retrospectively sacrifice pay you've already received so salary sacrifice must be set up in advance to apply to forthcoming pay periods.
• It's voluntary and adjustable. You can generally change or stop the arrangement by telling your employer or payroll team.
• The money goes into your super fund. With CFS, the contributions land in your chosen investment options alongside your employer's compulsory contributions.

Salary sacrifice and after-tax (non-concessional) contributions are the two main ways to add to your super. The main difference between them is when tax is taken out.

• Salary sacrifice is a before-tax contribution that is usually counted as part of your concessional contribution cap and is generally taxed at 15% on the way into super¹. It also reduces your take home pay.
• After-tax (non-concessional) contributions come from money you've already paid income tax on – for example, by transferring savings from your bank account. They generally aren't taxed again on the way in, and they count towards a separate (non-concessional) cap within your super.

Salary sacrifice tends to be the more tax-effective route for people whose marginal tax rate is above 15%, as it means you save tax on the difference.

The key benefit of salary sacrifice is that you save tax on the gap between the 15% concessional rate that generally applies to before-tax super contributions, and your marginal income tax rate on the same money if you took it as salary.

Generally, your income will be taxed at the following rates.

²Australian Taxation Office Australian resident tax rates 2025-26. The above rates do not include the Medicare levy of 2%.

From 1 July 2026, the tax rate that applies to taxable income of between $18,201 and $45,000 will be lowered to 15%.

Your marginal tax rate is the highest rate of tax paid on the last dollar of your taxable income.

When you salary sacrifice instead, that slice is generally taxed at 15% inside super – so if your marginal rate is higher than 15%, the difference stays in your super and compounds, rather than being paid in tax.

In short: salary sacrifice is most tax-effective when your marginal income tax rate is higher than the concessional super tax rate of 15% – the bigger the gap, the bigger the potential saving.

Imagine you redirect a portion of your before-tax pay into super through salary sacrifice. 

Instead of that amount being taxed at your marginal income tax rate as salary, it's taxed at 15% as a concessional contribution to super. The tax you would otherwise have paid above 15% effectively stays invested in your super.

Meanwhile, your take home pay is only reduced by the after-tax equivalent amount that you salary sacrificed.

Finally, in super, your money can compound faster than if it was invested in the bank, because investment earnings are taxed at the concessional super tax rates instead of at your marginal tax rate. 

Here’s how salary sacrifice can work in practice.

Sofia is aged 30 and earns $98,000 a year. She salary sacrifices $1765 a year into super by having her employer deduct $147 each month from her pre-tax pay, reducing her taxable income to $96,235.

As a result, Sofia’s tax bill will reduce from $22,148 to $21, 583 that year – a saving of $565 a year. Her take-home pay will be $74,652 – which is only $1,200 less than if she made no contributions to her super. 

Sofia’s employer pays the 12% compulsory Super Guarantee contribution into Sofia’s super. 

With the $1,765 she salary sacrificed into super, her net contributions to super will be $11,496 for the year (after deducting 15% super contributions tax).

Super is invested in a high growth fund for 30 years at 7% annual average return. Assumptions as per the Moneysmart Super Contributions Optimiser³.

If she made no voluntary contributions to her super, her net contributions (after the 15% super contributions tax is deducted) would be $9,996 – which is $1,500 less than with the salary sacrifice.

After a year, Sofia has taken home $1200 less in pay but has directed an extra $1,500 to her super – which then compounds over time. 

If Sofia starts with $30,000 in her super, averages a 7% return each year over 30 years, and continues to earn income and salary sacrifice into her super at the same rate, at age 60, she will have an additional $73,583 in her super account at a ‘cost’ to her take-home pay of $36,000, or $23.08 a week.

Salary sacrifice may not be the right strategy for everyone:

• If your marginal tax rate is at or below 15%, sacrificing into super may not produce a tax saving and could even be less tax-effective than other contribution types.
• If you'd be pushed over your concessional contributions cap, the excess is effectively taxed at your marginal rate, removing any tax benefits.
• If you need the money before retirement. Remember that super is generally preserved until you reach a condition of release – you can't simply withdraw it.

It may be worth speaking to a financial adviser to determine the right strategy for you. Or contact our Guidance consultants, who can help you find the right financial advice for your circumstances.

There's a limit on how much you can contribute before tax each year. It's called the concessional contributions cap, and salary sacrifice counts towards it. 

The concessional contributions cap is the annual limit on before-tax contributions to your super – including salary sacrifice, your employer's compulsory contributions, and any personal contributions you claim a tax deduction for. 

The cap amount can be found on the ATO website and can change each financial year. Learn more about the 2026-27 contributions cap amounts.

Remember: the concessional cap covers all your before-tax contributions combined – not just your salary sacrifice. Your employer's Super Guarantee payments also count towards your cap before any additional voluntary contributions are added. 

The compulsory super your employer pays – the Super Guarantee – is itself a concessional contribution. It counts towards the same cap as your salary sacrifice. 

So when you're deciding how much to sacrifice, start by working out how much of the cap your employer contributions already use and will be using for the rest of the financial year, then sacrifice up to the amount remaining before you reach the limit.

It is also important to consider any performance bonuses that may be payable, as some bonuses can also receive Super Guarantee contributions.

To track your contributions: log into your CFS account or download the CFS app. 

If you haven't used your full concessional cap in recent financial years, you may be able to carry forward the unused portion and contribute more than the standard annual cap in a later year.

Under the carry-forward rule, unused cap amounts from the previous five financial years can be carried forward and combined with the basic concessional cap in the current Financial Year. In practice, that gives you up to six year’s worth of cap to use in one year. To qualify, you generally need to meet two conditions:

• Have accrued unused concessional cap amounts in the previous five financial years, and
• Your total super balance (TSB) must be under the $500,000 threshold on 30 June of the prior year to use it.

The carry-forward rule can apply to all types of concessional contributions including salary sacrifice contributions and personal deductible contributions.

Carry-forward can be especially useful in a year when your income (and marginal tax rate) is higher than usual, or after a period out of the workforce. Learn more about super caps and limits at the ATO.

If your before-tax contributions go over the concessional cap, the excess is generally added back to your assessable income and taxed at your marginal rate, with an adjustment for the 15% contribution tax already paid to the super fund.

In other words, going over the cap removes the tax advantage on the excess. 

This is the main reason to track your total before-tax contributions across the financial year. 

Track your contributions in CFS by logging into your CFS account or downloading the CFS app. 

For any super held outside CFS, check your myGov ATO record for your unused concessional cap amounts.

Division 293 is an additional tax on concessional super contributions for higher-income earners. 

If your Division 293 income⁴  including your concessional contributions exceeds $250,000 in a given financial year, an extra 15% tax may apply to some or all of your concessional contributions – on top of the standard 15% super contributions tax.

Even where Division 293 applies, salary sacrifice can still be tax-effective for high-income earners since contributions are taxed at up to 30% rather than the highest marginal tax rate of 47%.

For many higher earners, making salary sacrifice contributions remains more tax-effective than receiving the same amount as salary.

Seek financial advice to determine the best strategy for your personal situation. Explore your financial advice options.

There's another way to make before-tax contributions: personal deductible contributions. 

This involves making a contribution from your after-tax money and then claiming a tax deduction in your tax return, which produces a similar tax outcome as salary sacrificing to super. 

Both contribution types count towards the same concessional cap.

Salary sacrifice suits people with a steady salary who want a set-and-forget arrangement handled automatically by payroll across the year.

Personal deductible contributions suit people with variable or non-salary income – for example, the self-employed, contractors, or anyone who prefers to contribute a lump sum and decide at tax time how much to claim.

The right balance depends on how regular your income is and how you prefer to manage cash flow. 

Both options count towards the same concessional cap and are taxed at the concessional rate of 15% on the way in. 

Setting up salary sacrifice generally involves touching base with your employer’s payroll team. Here's a step-by-step guide.

Work out how much before-tax super is already going in and is expected to go in by the end of the financial year (your employer's Super Guarantee counts towards the cap). Check your myGov account to help you work out how much more you may be able to contribute before you reach the concessional cap.

Choose an amount or percentage of your pay that fits your budget and keeps your total before-tax contributions under the cap. Modelling it first helps – the salary sacrifice calculator shows the impact on both your take-home pay and your super.

Salary sacrifice is an agreement with your employer, so put your request to your manager, HR, or payroll team. Employers may agree to set one up with you, but they are not required to, so check with your employer to confirm. Many employers have a simple application form. Remember it can only apply to the amount of pay you haven't earned yet.

Make sure your employer is directing the contributions to your Colonial First State super account. You can check that contributions are arriving by logging into your account.

Caps, thresholds, and your own income can all change. Review your arrangement at least once a year – and whenever your pay or circumstances change – to make sure you're still within the cap and the amount still suits you.

• Potential tax savings: before-tax contributions are generally taxed at 15% within super rather than at your marginal rate.
• More invested for retirement: the money you'd otherwise pay in tax stays working in your super.
• Automatic and consistent: payroll handles it every pay cycle, so it's a disciplined way to save.
• Compounding over time: contributing earlier gives your super longer to grow.
• Hands-off and low effort: once set up through payroll, it runs in the background – no need to take proactive steps like you would with personal deductible contributions.

• Lower take-home pay: you're redirecting income you'd otherwise receive now.
• Preservation: super is generally locked away until you meet a condition of release, so it isn't for money you'll need soon.
• Timing uncertainty: unlike super guarantee (SG), which must generally be paid at the same time as your salary and wages under the Payday Super rules, there’s generally no strict regulatory deadline for salary sacrifice contributions to be received – so timing can vary depending on employer processes.
• Division 293: higher earners may pay additional tax, reducing the benefit.

Salary sacrifice tends to suit those who have regular PAYG earnings, whose marginal tax rate is above 15%, who can comfortably set aside part of their pay until retirement, and who want a simple, automatic way to grow their super. 

It's less suited to those on lower marginal rates, contractors with variable income, or anyone who can’t afford any reduction in their take home pay. 

Because it depends on your circumstances, it may be worth checking if it’s right for you by seeking financial advice.