How salary sacrificing into super could work for you

Salary sacrifice can be a good way to pay money into super without making a big change to your current lifestyle. We explain how salary sacrifice works – and why the strategy can be a tax effective way to grow your super.


An effective way of building your super savings (and potentially reducing your taxable income) is through salary sacrificing – that is, asking your employer to put some of your before-tax income directly into your super fund.

The amount you salary sacrifice is on top of the Super Guarantee (SG) contributions your employer must pay which increased to 10% on 1 July 2021.



Build your super faster

Making extra payments into your super can help build your super savings more quickly. What’s more, the longer you have your money invested, the more you will enjoy the benefits of compound interest. For your super account, this means the investment return is generated on the returns you’ve already earned.

Pay less income tax

If you choose to reduce your before tax income by salary sacrificing into super, you may be able to reduce what you pay in income tax for the financial year.

You only pay 15% tax on contributions made through a salary sacrifice arrangement if you earn under $250,000 a year or 30% if you earn over $250,000 a year.

This tax is likely to be less than your marginal tax rate, which you can find on the Australian Taxation Office (ATO) website.



Every year, you can make up to $27,500 of concessional contributions to you super without incurring extra tax. Some people can contribute more if they are eligible for ‘Carry-forward unused concessional contributions’.

It’s important to note that other contributions count toward your concessional contributions can include SG contributions made by your employer and contributions you make using after tax dollars and where you claim a tax deduction.

To work out the right amount for you:

  • Check to see how much super your employer pays.
  • Work out your day-to-day expenses now to decide how much you reasonably put aside for retirement (even if it’s only a small amount – every bit counts).


Make sure that the total of your concessional contributions don’t go over your concessional contributions cap, or you could end up paying extra tax.

TIP: You can now keep track of your super contributions – please refer to our article ‘accessing super contribution information through myGov’.





It’s always a good idea to speak to your Pinnacle adviser first and see if a salary sacrifice arrangement is right for you.

Things to consider if you decide to salary sacrifice into super:

  • Check your employer offers salary sacrifice.
  • Decide how much you’d like to sacrifice into super.
  • Notify your employer and get the agreement in writing
  • Make sure you don’t exceed the concessional contributions cap



Before you salary sacrifice, it’s important to remember that super is a long term investment and you can’t access this money until you reach age 65, or meet another condition of release (such as financial hardship).

If your employer doesn’t offer salary sacrifice, there are other ways you can contribute into super:

  • Get a boost with personal contributions – Find out about Government co-contributions; and contributing to your spouse or partner’s super. You may be able to claim a tax deduction for certain personal contributions.
  • Finding other super – Are you missing any super? If so, there are easy ways to find it. And you can save on fees by consolidating multiple accounts. However, first make sure any insurance policies won’t be affected.



If you have any questions about super contributions, contact your Pinnacle Adviser who can provide expert guidance based on your individual situation.


1  All concessional contributions are taxed at 15% when made to the super fund. If your total income plus concessional contributions is $250,000 or more you will be subject to an extra 15% Div 293 tax on some or all of your concessional contributions. Concessional contributions include superannuation guarantee, salary sacrifice and personal deductible contributions.


Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information. You should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.


Source: Colonial First State