Salary Sacrificing to Super Explained | Benefits & Limits

• Tax
• ||
• November 3, 2025

When it comes to building wealth and reducing tax in Australia, salary sacrificing to super is one of the most effective strategies available. It’s simple in concept, powerful in execution — and when done right, it can help you save thousands in tax while growing your retirement balance faster.

At KSH TAX, Perth’s leading accounting and tax agents, we help employees and employers structure salary sacrifice arrangements correctly to stay compliant and get the most out of every dollar. Let’s explore how it works.

What Does Salary Sacrifice to Super Mean?

Salary sacrificing to super (also known as salary sacrifice into superannuation) means you choose to have part of your pre-tax salary paid directly into your super fund instead of receiving it as take-home pay.

That amount is then treated as a concessional (before-tax) contribution and taxed at just 15% inside your super fund, instead of your normal income tax rate (which could be as high as 45%).

So, if your marginal tax rate is higher than 15%, you’re effectively redirecting part of your income into a lower-tax environment — saving on tax now while boosting your retirement savings for later.

Salary Sacrifice vs Voluntary Contribution

It’s easy to confuse salary sacrifice with voluntary contributions, but there’s a key difference:

• Salary sacrifice (pre-tax) – Paid directly from your salary before tax. These are concessional contributions.
• Voluntary contributions (after-tax) – Paid from your take-home pay after tax, often to top up your super balance. These are non-concessional contributions.

Both help you grow your super, but only salary sacrifice reduces your taxable income.

For example, if you’re earning $90,000 a year and salary sacrifice $10,000 into super, your taxable income drops to $80,000 — saving you income tax right away.

Benefits of Salary Sacrificing to Super

There’s a reason many Australians are turning to this strategy — it offers both short- and long-term benefits:

1. Tax savings – Contributions are taxed at 15% inside your fund instead of your marginal tax rate.
2. Increased retirement savings – You grow your super faster without having to budget extra money from take-home pay.
3. Budget control – Because it’s automated through payroll, you can consistently invest for your future without the temptation to spend.
4. Employer compliance – Employers also benefit from supporting salary packaging, improving retention and employee satisfaction (see Salary Sacrifice for Employers).

The earlier you start, the more compounding works in your favour.

How Much Super Can I Salary Sacrifice?

This is one of the most common questions we hear at KSH TAX — and it’s a crucial one.

In Australia, there’s an annual concessional contribution cap. As of now, you can contribute up to $27,500 per financial year in total concessional contributions.

This cap includes:

• Your employer’s compulsory Super Guarantee contributions (currently 11.5% of your salary), and
• Any salary sacrifice contributions you make.

For example:
If your employer pays $9,000 in compulsory super, you can contribute an additional $18,500 through salary sacrifice without exceeding the cap.

If you go over the cap, the extra amount is taxed at your marginal rate, which defeats the purpose — so planning is essential.

At KSH TAX, we help you calculate the optimal contribution amount based on your salary, tax bracket, and goals.

Salary Sacrifice Super Example

Let’s break it down with real numbers.

Scenario:
James earns $100,000 per year. Without salary sacrifice, his taxable income is $100,000, and his tax (excluding Medicare levy) is roughly $22,967.

He decides to salary sacrifice $10,000 into his super.

• His taxable income drops to $90,000.
• His income tax reduces by about $3,700.
• Inside his super fund, the $10,000 is taxed at 15% ($1,500).

Net tax saved: $2,200 — while increasing his super balance by $8,500 after contributions tax.

That’s tax efficiency in action.

Salary Sacrifice Super vs Voluntary Contribution

Both strategies grow your super, but which one is better?

Type	When It’s Paid	Taxed At	Main Benefit
Salary Sacrifice (Pre-Tax)	Before tax	15%	Reduces taxable income, boosts super efficiently
Voluntary Contribution (After-Tax)	After tax	0% (contributions made from net income)	May be eligible for government co-contributions

In summary:
If your income tax rate is higher than 15%, salary sacrifice is usually more tax-efficient.
If you’ve already maximised your concessional cap, voluntary contributions can still grow your super tax-free inside the fund.

Can You Withdraw Salary Sacrifice Super?

Generally, no — not until you meet a “condition of release.”

Salary sacrifice super contributions are locked away like other super savings. You can usually only access them:

• After reaching your preservation age (between 55 and 60, depending on your birth year) and retiring, or
• Under limited conditions such as severe financial hardship, permanent disability, or the First Home Super Saver Scheme.

So, while it’s great for long-term wealth building, it’s not suitable if you might need quick access to your money.

Should I Salary Sacrifice Super?

If you’re earning a moderate to high income, salary sacrificing into super can be one of the smartest tax strategies available.

You should consider it if you:

• Pay more than 15% tax on your income,
• Want to increase your retirement savings, and
• Have room under your concessional cap.

However, it might not be ideal if:

• You’re on a lower income,
• You need more cash flow day-to-day, or
• You’re close to retirement and risk exceeding contribution limits.

For a balanced view, read Pros & Cons of Salary Sacrifice — it explains situations where the numbers don’t stack up.

Salary Sacrifice and Superannuation for Employers

Employers play a key role in setting up salary sacrifice correctly. It must be:

• Agreed upon in writing before income is earned,
• Processed through payroll as pre-tax contributions, and
• Reported correctly on payslips and to the ATO.

Done right, it’s win-win — employees enjoy tax benefits, and employers improve job satisfaction and retention without increasing payroll costs.

KSH TAX helps employers set up compliant payroll systems and calculate the correct contribution amounts under Australian superannuation law.

Talk to Us — Your Super Salary Sacrifice Specialists

At KSH TAX, we make salary sacrifice easy to understand and simple to implement. Whether you’re an employee looking to maximise your tax savings or an employer wanting to offer smarter benefits, we’ll tailor a plan that fits your goals.

Contact us for a personalised super salary sacrifice review – we’ll help you structure your contributions correctly, stay compliant with ATO rules, and make sure your money works harder for you.

Final Thoughts

Salary sacrificing to super is a proven, tax-smart way to build long-term wealth — but it needs to be structured carefully to avoid exceeding contribution limits or losing short-term flexibility.

With the right guidance, it can deliver powerful results for both employees and employers alike.