Salary Sacrifice: How Much Is Too Much?

Salary sacrifice into super can deliver significant tax savings—but only up to a point. Once you exceed the concessional contributions cap, the tax advantage disappears and you may end up worse off than if you'd taken the money as salary.

This scenario provides general information only and is not personal financial advice. Consider consulting a licensed financial adviser for advice tailored to your situation.

What decision is being compared

This scenario compares different salary sacrifice levels to show:

  • When salary sacrifice provides maximum tax benefit
  • When you're approaching the concessional cap
  • What happens when you exceed the cap

Example: $120,000 salary

Assuming employer SG of 12% = $14,400 in employer contributions

No extra sacrifice

SG only

Employer SG
$14,400
Salary sacrifice
$0
Total concessional
$14,400
Under cap by
$15,600
Contributions tax (15%)
$2,160

Sacrifice to cap

Maximised

Employer SG
$14,400
Salary sacrifice
$15,600
Total concessional
$30,000
Under cap by
$0
Contributions tax (15%)
$4,500

Over the cap

Excess taxed at marginal rate

Employer SG
$14,400
Salary sacrifice
$20,600
Total concessional
$35,000
Excess amount
$5,000
Excess taxed at
Marginal rate
Key insight: The $15,600 sacrifice (middle scenario) saves tax because it's taxed at 15% instead of your marginal rate (30% at this income). The extra $5,000 in the third scenario provides no tax benefit—it's added back to your taxable income.

How the concessional cap works

The concessional contributions cap is the maximum amount of before-tax contributions that receive the 15% tax rate. For 2025-26, this cap is $30,000.

The cap includes all concessional contributions:

  • Employer SG: Currently 12% of your ordinary time earnings
  • Salary sacrifice: Additional pre-tax contributions you arrange with your employer
  • Personal deductible contributions: Contributions you make personally and claim as a tax deduction

To calculate your available sacrifice room: $30,000 − Employer SG = Maximum additional sacrifice

What happens when you exceed the cap

When your concessional contributions exceed $30,000:

  1. The excess amount is added to your assessable income for the year
  2. You pay tax on the excess at your marginal tax rate
  3. You receive a 15% tax offset (because the fund already paid 15% contributions tax)
  4. The excess counts towards your non-concessional cap (but doesn't use it up separately)

Example: $5,000 excess at 30% marginal rate

  • Tax on excess: $5,000 × 30% = $1,500
  • Less 15% offset: $5,000 × 15% = ($750)
  • Additional tax payable: $750

Net result: You've paid 30% total (15% in fund + 15% additional) instead of just 15%.

What most people misunderstand

"I can sacrifice as much as I want for tax savings"

The tax benefit only applies up to the $30,000 cap. Beyond that, you lose the 15% rate advantage. While the money still goes to super (subject to other caps), there's no immediate tax benefit on the excess.

"My employer handles the cap for me"

Your employer doesn't monitor your total concessional contributions. If you have multiple jobs, investment income with personal deductible contributions, or change jobs mid-year, you're responsible for tracking your total and avoiding excess contributions.

"Going over the cap is always bad"

Exceeding the cap isn't ideal, but it's not catastrophic. The excess is taxed at your marginal rate (with a 15% offset), and the money stays in super unless you elect to release it. In some cases, getting money into super may still align with your goals despite the tax.

"The cap resets on 1 July regardless of when I contribute"

Contributions count in the financial year they're received by your super fund, not when they're deducted from your pay. Late-June contributions may not be received until July, pushing them into the next year's cap.

Planning your salary sacrifice

To maximise tax effectiveness without exceeding the cap:

  • Calculate your employer SG first: 12% of your ordinary time earnings
  • Allow a buffer: Leave $500–$1,000 under the cap to account for timing variations
  • Check mid-year: Review your super fund statements to confirm actual contributions received
  • Consider carry-forward: If you have unused cap from previous years and your total super is under $500,000, you may be able to contribute more

FAQ

What is the concessional contributions cap for 2025-26?

The concessional contributions cap for 2025-26 is $30,000. This includes employer SG contributions, salary sacrifice, and personal deductible contributions. Exceeding this cap means the excess is added to your taxable income and taxed at your marginal rate.

What happens if I exceed the concessional cap?

Excess concessional contributions are included in your assessable income and taxed at your marginal tax rate. You'll receive a tax offset for the 15% contributions tax already paid in the fund. You can choose to release up to 85% of the excess from your super fund to help pay the additional tax.

Does my employer's super guarantee count towards the cap?

Yes. The $30,000 concessional cap includes all before-tax contributions: employer SG (12% for 2025-26), salary sacrifice amounts, and any personal contributions you claim as a tax deduction. You must account for all sources when planning salary sacrifice.

Is salary sacrifice still worth it for high earners?

For most high earners, yes—but the benefit is reduced. If your income plus super contributions exceeds $250,000, Division 293 tax applies, increasing the contributions tax to 30%. Even so, this is still lower than the top marginal rate of 45% plus Medicare levy.

Use the salary sacrifice calculator

Compare your take-home pay at different salary sacrifice levels and see how much you could save.

Use the salary sacrifice calculator →
← Back to superannuation scenarios