How salary sacrifice works in practice
Salary sacrifice is an agreement for part of your pre-tax salary to be paid elsewhere, most commonly into super. For many employees that means a lower taxable salary on the payslip now, potentially lower income tax now, and more money going into retirement savings.
The ATO treats super salary sacrifice as an employer contribution under an effective arrangement. Those contributions generally count towards the concessional contributions cap, and they are not the same as making an after-tax personal contribution and claiming a deduction later.
Three worked examples
| Scenario | Gross salary | Salary sacrifice | What to check |
|---|---|---|---|
| Small regular contribution | $90,000 | $5,000 to super | Taxable salary falls to $85,000 before other adjustments, while more money goes into super. |
| Raise redirected into super | $110,000 → $120,000 | $10,000 of the raise | Useful when you want to compare extra retirement savings against higher current take-home pay. |
| Higher-income planning | $150,000 | Variable | Check the concessional cap, reportable employer super and whether extra contributions interact with Division 293 tax. |
Why the cash reduction is smaller than the sacrifice amount
If you sacrifice $5,000 pre-tax, your take-home pay usually falls by less than $5,000 because the amount is removed before income tax is calculated. That is the core reason salary sacrifice can be attractive for super contributions. The exact net effect still depends on your income level and any other settings on the page.
What to compare on this page
Baseline pay
Run your salary with no sacrifice first so you have a clean take-home benchmark.
New cash flow
Add the planned sacrifice amount and compare annual, monthly and fortnightly net pay rather than focusing only on one annual number.
Super and caps
Check employer super plus salary sacrifice together, because the total concessional amount matters more than the sacrifice number in isolation.
Important rules to remember
- For 2025–26, the ATO says the general concessional contributions cap is $30,000.
- Salary-sacrificed super contributions generally count as employer contributions.
- Reportable employer super contributions can still matter for some adjusted-income style tests.
- Higher-income earners may also need to think about Division 293 tax separately.
Source-backed notes
- ATO salary sacrificing for employees explains how an effective arrangement works and how super salary sacrifice is treated.
- ATO concessional contributions caps confirms the current cap settings.
- ATO reportable employer super contributions explains why salary-sacrificed super can still matter for income tests.
- ASIC Moneysmart salary packaging is a useful consumer guide for broader packaging trade-offs.
Frequently asked questions
Does salary sacrifice always save tax?
Often, but not automatically. The value depends on your marginal tax rate, the concessional cap, contribution tax inside super and what you give up in current cash flow.
What cap should I watch?
Salary-sacrificed super contributions generally count toward the concessional contributions cap. For 2025–26 the general concessional cap is $30,000.
Can salary sacrifice affect other tests?
Yes. Some borrowing, child support and means-tested calculations can look at adjusted taxable income or reportable employer super contributions rather than ordinary taxable salary alone.