How salary sacrifice super contributions affect your take-home pay

How salary sacrifice super contributions change what you take home

When you arrange a salary sacrifice agreement with your employer, you choose to divert part of your pre-tax salary into your super fund instead of receiving it as cash. This is a common way to boost your retirement savings while reducing the income tax you pay each pay period. But the amount that actually lands in your bank account will be lower than your gross salary, because the sacrificed portion never reaches your pocket. Here is how to work out the net effect on your take-home pay.

What happens to your taxable income

Under a salary sacrifice arrangement, the sacrificed component of your total salary package is not counted as assessable income for tax purposes. The Australian Taxation Office explains that this means it is not subject to pay as you go (PAYG) withholding tax. Your employer still pays the full super guarantee (12% from 1 July 2026) on your ordinary earnings as if no sacrifice existed. The sacrificed amount is treated as an employer super contribution and is taxed inside your super fund at 15%, which is typically lower than your marginal tax rate.

For example, if your gross salary is $100,000 and you salary sacrifice $10,000 into super, your taxable income becomes $90,000. You pay income tax and the Medicare levy on $90,000 instead of $100,000. The $10,000 goes to your super fund, where it is taxed at 15% ($1,500), leaving $8,500 invested for your retirement. Your take-home pay is calculated on the reduced taxable income, so your fortnightly bank deposit will be smaller than if you had taken the full salary as cash.

The concessional contributions cap and Division 293 tax

There is a limit to how much you can contribute to super at the concessional 15% tax rate. For 2026–27 the general concessional contributions cap is $32,500. This cap includes your employer’s super guarantee contributions, any salary sacrifice amounts, and any personal contributions you claim as a tax deduction. If your total concessional contributions exceed $32,500 in a financial year, the excess is included in your assessable income and taxed at your marginal rate (though the excess concessional contributions charge no longer applies).

Additionally, if your combined income and concessional super contributions for Division 293 purposes exceed $250,000, you may pay an extra 15% tax on the excess or on your contributions, whichever is less. This Division 293 tax applies on top of the 15% contributions tax. You can check your situation using the Clearance tool on this site.

Medicare levy and low-income thresholds

The Medicare levy is 2% of your taxable income for most residents. However, if your taxable income is below the single lower threshold of $28,011, you pay no Medicare levy. Between $28,011 and $35,013, the levy is phased in at 10 cents per dollar over the lower threshold. Above $35,013, the full 2% applies. Because salary sacrifice reduces your taxable income, it can also lower your Medicare levy or even move you below the threshold if your income is close to the boundary.

Estimating your after-tax pay

To estimate what you will actually receive in your bank account each fortnight, start with your gross salary, subtract the amount you salary sacrifice into super, then apply the income tax rates for 2026–27 and the Medicare levy. The tax rates are:

• Nil on the first $18,200
• 15 cents per dollar from $18,201 to $45,000
• $4,020 plus 30 cents per dollar from $45,001 to $135,000
• $31,020 plus 37 cents per dollar from $135,001 to $190,000
• $51,370 plus 45 cents per dollar over $190,000

The Low Income Tax Offset (LITO) can reduce tax further for taxable incomes up to $66,667. Remember that super guarantee contributions are not deducted from your pay; they are paid by your employer on top of your salary. If your job advertisement states a salary “plus super”, the super is additional and does not reduce your take-home.

Is salary sacrifice right for you?

Salary packaging is generally more beneficial for people on middle to high incomes because their marginal tax rate is higher than the 15% super contributions tax. However, you must consider the caps and your cash flow needs. Sacrificing too much could leave you short of money for living expenses. The Salary packaging guide on this site covers the types of benefits you can package and the fringe benefits tax implications. For a detailed estimate of your own situation, use the Take-home pay calculator.

Key points to remember

• Salary sacrifice super contributions are employer contributions, not personal contributions.
• They do not reduce the super guarantee your employer must pay.
• They reduce your taxable income, so you pay less income tax and Medicare levy.
• The concessional contributions cap for 2026–27 is $32,500.
• Division 293 tax may apply if your income plus concessional contributions exceeds $250,000.
• Your take-home pay will be lower by the sacrificed amount, but your super balance grows faster.

For more information on tax and Medicare thresholds, see Tax and Medicare. To compare your salary with national averages, visit Average pay.