Salary sacrificing into super pros and cons: How to compare job offers by take-home pay

Introduction

When you compare job offers, the headline salary is only part of the story. What really matters is the amount that lands in your bank account each fortnight after tax and the Medicare levy. Salary sacrificing into super is a common way to reduce your taxable income and boost your retirement savings, but it also lowers your immediate take-home pay. Understanding the salary sacrificing into super pros and cons helps you make an informed choice between offers.

How take-home pay is calculated

Your take-home pay depends on your gross salary, your tax bracket, and any salary sacrifice arrangements. For 2026-27, the Australian tax rates are:

• $0 – $18,200: Nil
• $18,201 – $45,000: 15c for each $1 over $18,200
• $45,001 – $135,000: $4,020 plus 30c for each $1 over $45,000
• $135,001 – $190,000: $31,020 plus 37c for each $1 over $135,000
• $190,001 and over: $51,370 plus 45c for each $1 over $190,000

You also pay the Medicare levy of 2% of your taxable income, unless you are on a low income. The latest published single-person Medicare thresholds are $28,011 and $35,013. If your taxable income is below $28,011, you pay no Medicare levy; between $28,011 and $35,013 you pay a reduced rate; above $35,013 you pay the full 2%.

For example, a full-time employee on the national minimum wage of $26.44 per hour earns $1,004.90 per week, or about $52,255 per year. After tax and Medicare, their take-home pay would be roughly $42,000 annually (depending on exact tax offsets). Use our Take-home pay guide to estimate your own figures.

The role of salary sacrifice

Salary sacrifice (also called salary packaging) lets you exchange part of your pre-tax salary for benefits. One of the most popular benefits is superannuation contributions. By directing some of your salary into super before tax, you lower your taxable income and pay less income tax. The Australian Taxation Office explains that these contributions are taxed inside your super fund at 15%, which is usually lower than your marginal tax rate.

However, salary sacrifice does not reduce your employer's super guarantee. Your employer must still pay the 12% super guarantee on your full salary as if no sacrifice existed. The sacrificed amount is also subject to the concessional contributions cap of $32,500 per year (including your employer's contributions).

Salary sacrificing into super pros and cons

Pros

• Lower taxable income: Every dollar you salary sacrifice reduces your assessable income, so you pay less income tax and Medicare levy.
• Taxed at 15% in super: The contributions are taxed at the concessional rate of 15% inside your super fund, which is often much lower than your marginal rate (which could be 30%, 37%, or 45%).
• Boost retirement savings: You build your super balance faster, which can help you achieve a more comfortable retirement.
• No fringe benefits tax: Super contributions are exempt from FBT, unlike many other salary-packaged benefits.

Cons

• Reduced take-home pay: The money you sacrifice is not available for everyday expenses. You need to be sure you can manage on the lower after-tax income.
• Concessional cap limit: If your total concessional contributions (employer SG plus salary sacrifice) exceed $32,500, the excess is taxed at your marginal rate plus an interest charge. High-income earners should also watch for Division 293 tax if your combined income and concessional contributions exceed $250,000.
• Locked away until preservation age: Super is generally inaccessible until you meet a condition of release (e.g., retirement after age 60). You cannot use it for short-term needs.
• May affect government benefits: Lower taxable income could reduce your eligibility for some income-tested benefits or increase others. Check with a financial adviser.

How to compare job offers

When comparing two job offers, follow these steps:

1. Calculate your base take-home pay using the 2026-27 tax rates and Medicare levy. Include any tax offsets like the Low Income Tax Offset (maximum $700 for incomes up to $37,500).
2. Factor in salary sacrifice options: If one employer offers salary packaging into super, estimate how much you would sacrifice and recalculate your take-home pay. Remember that the sacrificed amount is not taxed now, but will be taxed at 15% in super.
3. Consider the total remuneration package: Look at the base salary plus super guarantee (12%) plus any other benefits. The Salary packaging page has more details.
4. Use our tools: The Take-home pay calculator and Tax and Medicare guide can help you compare offers side by side.

Conclusion

Salary sacrificing into super can be a tax-effective way to save for retirement, but it reduces your immediate cash flow. By understanding the salary sacrificing into super pros and cons, you can choose the job offer that best matches your financial goals. Always consider your personal circumstances and, if needed, seek professional tax advice. For more benchmarks, see our Minimum wage and Super guides.