How salary sacrificing works
A salary sacrifice agreement is when you choose to give up or ‘sacrifice’ part of your before-tax salary, adding it directly to your super account.
Salary sacrifice is an arrangement you set up through your employer.
Get started now
- Use our contributions adviser calculator to help work out how much to contribute
- Talk to your employer to make sure it’s okay with them
- Log into your account and go to the Make a contribution page. Select the 'Salary sacrifice' button.
This will open the Contribution form.
- In Step 2 of the form tick the 'Regular deductions from your pay (before-tax also known as salary sacrifice)' box
- Complete the form and give it to your employer
Why add to your super from your before-tax salary?
Salary sacrifice can be worth exploring if you pay more than 15% tax on your salary*.
That’s because any before-tax money you pay into your super is taxed at either 15% or 30% (depending on your income), whereas any money you take home will be taxed at your regular income tax rate, which could be as high as 47%†.
By putting more money into your super and taking home less, you may reduce the overall amount of tax you pay.
How much contributions tax do I pay?
People whose adjusted taxable income‡ is less than $250,000 a year pay 15% on the pre-tax contributions going into their super.
People whose adjusted taxable income is $250,000 a year or more pay a higher rate of tax on any pre-tax contributions – 30% instead of 15%.
It’s important to remember you generally can’t access your super money until you reach preservation age – generally age 60 – and permanently retire from the workforce.
* You should consider your debt levels before adding to your super.
† Including the Medicare levy.
Small amounts can make a big difference
You don't have to add large amounts - even a small sum added to your super now can make a big difference over time:
- An extra $25 a week from age 35 to retirement at 65 could add around $58,000 to your final retirement amount.
- An extra $50 a week could add around $116,000§
Get the lifestyle you want in retirement by saving a little more now.
§Source: contributions adviser calculator. Key assumptions: starting age: 35; age of retirement: 65; starting income: $50,000; starting super balance: $20,000; investment returns: 4.66% per annum.
What you should know about salary sacrifice
Not as effective for low-income earners
If you earn below $37,000 there may be limited advantage in a salary sacrifice arrangement because the tax rate on your salary is only a few percentage points more than the tax on your super contributions.
A Government co-contribution could be a more effective way to boost your super.
It may impact your existing benefits
If you have benefits such as compulsory employer super contributions, holiday loadings, shift allowances and overtime that are based on actual salary level, these may be reduced under a salary sacrifice arrangement. To protect these, you will need to have a written agreement with your employer that details how these payments will be calculated.
You can’t claim deductions or tax offsets for before-tax contributions. This is because you’re already paying less tax (15%) on the amounts you pay into your super. You also can’t claim a deduction for the cost of any administration fees paid to your employer to set up and keep a salary sacrifice arrangement.
Fringe benefits tax
A before-tax contribution isn't a fringe benefit and isn't subject to fringe benefits tax. It shouldn't be reported as such on your PAYG payment summary.
Restrictions to be aware of
- Your employer may limit the amount you can salary sacrifice (pay into your super before tax)
- You cannot salary sacrifice income that you have already earned
- You cannot salary sacrifice award payments
- You cannot salary sacrifice bonus or commission payments after they have been earned
- There’s a limit of $25,000 a year for all before-tax contributions. This includes salary sacrifice, Superannuation Guarantee and other employer contributions. Anything that exceeds these limits will be taxed at the highest rate of 47%†.
Detailed information on making before-tax contributions into your super is also available from the Australian Taxation Office (ATO) website or by contacting 13 10 20.
†Including the Medicare levy.
‡The definition of 'adjusted taxable income' for this purpose includes taxable income, concessional superannuation contributions, adjusted fringe benefits, total net investment loss, target foreign income, tax-free government pensions and benefits, less child support.