Should I salary sacrifice super? A guide to tax savings and take-home pay
Your take-home pay after salary sacrifice depends on your marginal tax rate and the amount sacrificed; there is no single figure.
Should I salary sacrifice super?
Deciding whether to salary sacrifice super depends on your income, tax bracket, and long-term goals. Salary sacrificing means you agree with your employer to put part of your pre-tax salary into your super fund instead of receiving it as cash. This reduces your taxable income, so you pay less income tax and Medicare levy. The sacrificed amount is taxed inside super at 15%, which is often lower than your marginal rate.
How salary sacrifice affects your take-home pay
Your take-home pay is what reaches your bank account after income tax and the Medicare levy. When you salary sacrifice, your taxable income drops, so the tax withheld from your remaining salary is lower. For example, if you earn $60,000 in 2026–27, your tax (excluding Medicare) would normally be $8,520 plus 2% Medicare levy. If you salary sacrifice $5,000 into super, your taxable income becomes $55,000, reducing your tax to $7,020 plus Medicare. Your take-home pay increases by the tax saved, but you receive $5,000 less cash.
Tax rates and thresholds for 2026–27
The Australian Taxation Office publishes the resident tax rates. For 2026–27, the first $18,200 is tax-free, then 15c per dollar up to $45,000, 30c per dollar up to $135,000, 37c per dollar up to $190,000, and 45c per dollar above that. The Medicare levy is 2% of taxable income, with reduced rates for low incomes below $28,011 (single) and a shading zone up to $35,013. These thresholds are the latest published single-person Medicare thresholds.
Super caps and Division 293 tax
The concessional contributions cap for 2026–27 is $32,500. If your combined income and concessional contributions exceed $250,000, you may pay Division 293 tax of 15% on the excess contributions. Salary sacrifice contributions count towards this cap, so plan carefully to avoid exceeding it.
Comparing with benchmarks
The national minimum wage from 1 July 2026 is $26.44 per hour and $1,004.90 per week. Full-time adult ordinary time earnings average $2,083.70 per week according to the ABS. If you earn around the minimum wage, salary sacrifice may offer less benefit because your marginal tax rate is lower. Higher earners in the 30c or 37c brackets save more by sacrificing into super.
Practical considerations
Salary sacrifice is not right for everyone. It reduces your immediate cash flow, so you need to cover living expenses. It also locks money away until you meet a condition of release (usually age 60 or retirement). Use the Super guide to understand your options, and check the Tax and Medicare page for detailed rate tables.
Summary
Salary sacrificing super can boost your retirement savings and reduce tax, but it lowers your take-home pay. Work out your marginal rate, check the cap, and ensure you can manage on the reduced cash. The Australian Taxation Office provides full rules on salary sacrifice arrangements.
Questions
How does salary sacrifice super reduce my tax?
When you salary sacrifice super, that part of your salary is not included in your assessable income for tax purposes. It is taxed inside your super fund at 15%, which is usually lower than your marginal tax rate. This reduces the amount of income tax and Medicare levy you pay, increasing your take-home pay compared to receiving the same amount as cash.
What is the concessional contributions cap for 2026–27?
From 1 July 2026, the general concessional contributions cap is $32,500. This includes all employer contributions (including salary sacrifice) and any personal contributions you claim as a tax deduction. If you exceed this cap, the excess is taxed at your marginal rate plus an interest charge.
Does salary sacrifice affect my employer's super guarantee?
No. Your employer must still pay the super guarantee (12% of your ordinary time earnings) on top of any salary sacrifice contributions. The sacrificed amount does not reduce the base your employer uses to calculate the super guarantee.