How much can I salary sacrifice into super? A guide to caps and tax benefits

How much can I salary sacrifice into super?

Salary sacrificing into super is a way to boost your retirement savings while reducing your taxable income. The key question is: how much can I salary sacrifice into super? The answer depends on the concessional contributions cap, your income, and your total super balance.

The concessional contributions cap for 2026-27

From 1 July 2026, the general concessional contributions cap is $32,500, as confirmed by the Australian Taxation Office . This cap applies to all before-tax contributions, including:

• Employer super guarantee (SG) contributions
• Salary sacrifice contributions
• Personal contributions you claim as a tax deduction

If you have multiple super funds, all concessional contributions are added together and count towards the cap. The cap is indexed in line with average weekly ordinary time earnings (AWOTE) and increases in increments of $2,500.

How salary sacrifice works

Under a salary sacrifice arrangement, you and your employer agree to divert part of your before-tax salary into your super fund. These contributions are treated as employer contributions and are taxed at 15% inside your super fund, which is often lower than your marginal tax rate. The sacrificed amount is not included in your assessable income, so you pay less income tax and Medicare levy.

Importantly, salary sacrifice does not reduce your employer's super guarantee obligation. Your employer must still pay the full 12% SG on your ordinary time earnings, as if no salary sacrifice existed. This is a key protection for your super balance.

How much can you actually sacrifice?

There is no legislated limit on the amount you can salary sacrifice, but the concessional contributions cap effectively limits the tax benefit. If you exceed the cap, the excess is included in your assessable income and taxed at your marginal rate less a 15% tax offset. You may also face additional tax if you do not release the excess from your super fund.

For example, if your annual salary is $108,352 (the full-time adult ordinary time earnings benchmark from the ABS), your employer's SG contribution (12%) is $13,002. That leaves $19,498 of cap space for salary sacrifice before you reach the $32,500 cap. If you earn the national minimum wage of $52,255, your SG is $6,271, leaving $26,229 of cap space.

Comparing to benchmarks

The national minimum wage is $26.44 per hour and $1,004.90 per week, or $52,255 annually. Full-time adult ordinary time earnings are $2,083.70 per week, or $108,352 annually. Your ability to salary sacrifice depends on your income and how much SG your employer pays. The higher your income, the more cap space you may have, but also the higher your marginal tax rate, making salary sacrifice more attractive.

Division 293 tax and high-income earners

If your combined income and concessional contributions exceed $250,000, you may be liable for Division 293 tax. This is an additional 15% tax on the excess over $250,000 or your taxable super contributions, whichever is less. This reduces the tax benefit of salary sacrifice for high-income earners.

Non-concessional contributions cap

In addition to concessional contributions, you can also make after-tax (non-concessional) contributions. From 1 July 2026, the non-concessional contributions cap is $130,000. These contributions are not taxed on entry but count towards your total super balance. Salary sacrifice does not affect this cap, but if you exceed the concessional cap, the excess may count towards your non-concessional cap.

Practical considerations

Before setting up a salary sacrifice arrangement, consider:

• Your total super balance (if it exceeds $1.9 million, you may not be able to make non-concessional contributions)
• Whether you have unused cap amounts from previous years that you can carry forward
• Your marginal tax rate and whether salary sacrifice will push you into a lower bracket
• The impact on government benefits or the Medicare levy surcharge

Use a Take-home pay calculator to estimate your net pay after salary sacrifice. You can also explore Salary packaging for other benefits like cars or novated leases.

Summary

So, how much can I salary sacrifice into super? The maximum tax-effective amount is the difference between the $32,500 concessional cap and your employer's SG contributions. For most employees, this is between $19,000 and $26,000 per year. But always check your total super balance and income level to avoid unexpected tax. The ATO provides detailed guidance on caps and limits.

Remember, salary sacrifice is a voluntary arrangement. Discuss it with your employer and consider seeking financial advice to optimise your super and tax position.