What is salary sacrifice?
Salary sacrificing to super is when you pay part of your salary into your super account before tax.
It's an extra payment you can choose to make on top of the super guarantee contribution your employer has to pay. And it's different to adding after-tax money to your super.
Salary sacrifice is also known as salary packaging. Not all employers offer it.
Are you a low-income earner?
If so, there's less benefits to salary sacrificing. Some other options to think about:
After-tax contributions
Sharing super with your spouse
Bonuses from the government
How does salary sacrifice work?
Case study: Nic is 30 years old and plans to retire at 67. They earn $80,000 a year before tax. They decide they can afford to use $100 a fortnight from their take-home pay to grow their super.
Here's what it might look like if Nic adds before-tax money to their super by salary sacrifice. And how it compares to adding after-tax money from their take-home pay.1
After-tax contribution
Grow your super by an extra
$150,300
(Increase to super before retiring at age 67)
How
Nic's take-home pay is $2,447 every fortnight and they make an after-tax contribution of $100.
Results
Super increases by $100 a fortnight
Take-home pay is reduced to $2,347 a fortnight
No tax saving (unless Nic claims a tax deduction)
Before-tax contribution (salary sacrifice)
Grow your super by an extra
$187,900
(Increase to super before retiring at age 67)
How
Nic's take-home pay is $2,447 every fortnight and they make a before-tax contribution of $147.
Results
Super increases by $125 a fortnight ($147 less 15% super tax)
Take-home pay is reduced to $2,347 a fortnight
Saves $650 a year in tax
Why is the take-home pay the same when adding $147 vs $100?
Paying $100 after tax or $147 before tax, either way, Nic is taking out $100 from their take-home pay.
The before-tax contribution reduces Nic's taxable income. So by using the tax savings, Nic can pay $147 into super and only reduce their take-home pay by $100. Even after the 15% tax is taken from the before-tax contribution of $147, their super increases by $125.
Is salary sacrifice worth it for me?
Benefits of salary sacrifice to super
Pay less tax
Salary sacrificing to super lowers your taxable income – so depending on your income, you could pay less tax.
Grow your super
Anything extra you put into your super now can make a big difference to how much you end up with when you retire.
Investment tax benefits
Investment earnings in super are taxed at up to 15%, which may be lower than the tax you pay on your income.
Use our salary sacrifice calculator
It's easy to do the sums online and see how extra payments add up over time. Use our super calculator to compare your options.
How to salary sacrifice to your super
There are limits on how much you can add to your super each year. This includes money you pay before tax.
Going over your limit could mean paying extra tax.
Work out how much you can afford
Check how much you want to add to your super with our salary sacrifice super calculator.
Talk to your employer
Ask your payroll office or salary package provider about starting salary sacrifice.
You can use our email template to let them know you want to start a salary sacrifice deduction.
Check your payments
You can see your salary sacrifice contributions in our app or in Member Online once it's started.
FAQs about salary sacrificing
Deciding what to do depends on what matters most to you – growing your super, paying less tax, or having more take-home pay.
