salary sacrifice
Boost your super with extra contributions from your before-tax pay through salary sacrifice. It’s never too late to start. A little extra now can go a long way tomorrow.
On this page:
what is salary sacrificing?
Salary sacrificing is when you arrange for your employer to put some of your take-home pay into your super account before income tax is deducted. This is in addition to your employer’s regular superannuation guarantee contribution, currently at 11%.
So, while you may ‘sacrifice’ some of your take-home pay, you’re actually benefiting by boosting your retirement savings tomorrow and reducing your taxable income today.
Salary sacrifice contributions are also known as before-tax super contributions or ‘concessional’ contributions.
Before you salary sacrifice to your super you should consider your current financial situation and how much additional money you can afford to put away, given you generally won't be able to access it until you retire.
Grow your super
Tipping some of your before-tax salary into your super could make a real difference in the future. You can put in as little or as much as you can afford each financial year, up to the cap of $27,500 (this includes employer contributions).
Save on tax
Before-tax salary put directly into super is generally taxed at 15%. If this is less than your marginal income tax rate, this could potentially reduce the amount of tax you have to pay.
important things to know about salary sacrificing
If you're a middle to high-income earner, you might save tax by making before-tax super contributions. This is because the tax you pay on your super is generally less than the tax you pay on your income from salary.
However, before-tax contributions may not be as tax-effective for low-income earners. If you're a low income earner and are looking for ways to boost your super, a government co-contribution could be a good alternative.
tax on, tax off: know your limits
Concessional (before-tax) contributions
There is a limit on the total amount of concessional contributions (before tax) that can be made into your super account each financial year. Concessional contributions are your employer contributions (including those made as salary sacrifice) and personal contributions you claim as a tax deduction. If you go over the limit, you might pay extra tax.
The concessional contribution cap for everyone, regardless of age, is $27,500 a financial year.
Your cap may be higher if your total super balance is below $500,000 on 30 June and the contributions made to your account are below the cap in previous financial years. This is known as the carry forward of unused concessional contributions cap. You can check if you have available cap capacity using the ATO services via your myGov account.
Things to consider:
- If you exceed your concessional contribution cap in a financial year the excess amount is included in your assessable income and taxed at your marginal tax rate.
- You may also pay extra tax as the government applies a 15% tax offset (representing the amount of tax you’ve already paid when it was contributed to your super account). You may be able to elect to withdraw up to 85% of your excess concessional contributions to help pay the tax liability.
- Any excess concessional contributions that are not taken from your super balance count toward your non-concessional contributions cap.
Tax for high income earners
If your income and concessional (before-tax) contributions during the financial year total more than $250,000 (this is the threshold for 2022/23 financial year) you could pay an additional 15% tax (up to 30% in total) on some or all the contributions made to your super in the financial year. If you have to pay the extra tax, you’ll receive a notice of assessment from the ATO. You can pay the extra tax directly or allow the ATO to release it from your super fund.
For more information on ways you can add to super, contribution caps and much more, read How super works (pdf).
next steps
Decide how much you want to put into your super from each pay, then follow these steps:
- Complete the Salary sacrifice form (pdf)
- Provide it to your employer/payroll department. Once it has been set up, your next payslip should show the amount you're adding to your super.
Anyone can make after-tax contributions to their super directly and claim the deduction on their tax return.
This is ideal if your employer doesn't offer salary sacrifice or if you are fully (or mostly) self-employed.
Find out more about after-tax super contributions.
Need some expert help with contributions?
Our super advisers can help work out a regular or lump sum contribution strategy that's right for you. You can see a super adviser at no extra cost: it’s all part of being with HESTA.