Salary Sacrifice
An arrangement where you direct part of your pre-tax salary into super (or other benefits), reducing your taxable income.
Salary sacrifice (also called salary packaging) is an arrangement where you agree with your employer to forgo part of your pre-tax salary in exchange for benefits — most commonly additional superannuation contributions. By redirecting income into super before income tax is calculated, you reduce your taxable income and pay only 15% contributions tax inside super, instead of your marginal tax rate (which could be up to 45% + Medicare levy).
For 2025–26, salary sacrifice contributions count towards your concessional contributions cap of $30,000 per year (which also includes your employer's SG contributions). For example, if your employer contributes $12,000 in SG, you can salary sacrifice up to $18,000 before hitting the $30,000 cap. If you have unused cap amounts from prior years (since 2018–19) and your total super balance is under $500,000, you may be able to carry forward and contribute more.
The tax savings are significant: on a marginal rate of 30%, salary sacrificing $10,000 saves you $1,500 in tax ($3,000 income tax saved minus $1,500 super contributions tax paid). For someone on the 37% rate, the saving is $2,200 per $10,000. However, be aware that salary sacrifice reduces your take-home pay, and the funds are locked in super until you reach preservation age and meet a condition of release.