Salary Sacrificing To Super

Salary Sacrificing: A tax effective way to make super contributions

Making voluntary super contributions is a great way to build up your superannuation into retirement, and it could also reduce the amount of tax you pay.

Salary sacrifice is an arrangement between you and your employer with your employer paying some of your pre-tax salary into your superfund which will form part of your concessional contributions. If you earn more than $37,000 a year this is typically a tax effective strategy.

In any given year you can make a concessional contribution to your superfund to the cap of $25,000 p.a. It is important to consider the employer contributions being made to your superfund are 9.5% of your salary and you should confirm that you do not exceed the concessional contribution cap of $25,000.

How does salary sacrificing work

You will need arrange with your employer to direct a portion of your pre-tax salary to your superfund. The benefits of salary sacrificing some of your pre-tax salary into super include:

  • You will pay less tax
  • You will boost your retirement savings
  • Investment earnings in super are concessionally taxed

Things to consider when salary sacrificing: 

  • Your money will be locked away until you reach preservation age and meet a condition of release
  • There are limits on how much you can salary sacrifice into super

Salary Sacrificing: A Case Study

John earns $90,000 before tax, excluding his employer’s super contribution. If he decides to salary sacrifice $10,000 into his superfund, he will save $1,950 in total.

John’s income Without salary sacrifice With salary sacrifice
Gross salary $90,000 $90,000
Less salary sacrifice to super $0 $10,000
Less tax + Medicare levy $22,067 $18,617
Take home (net) pay $67,933 $61,383
John’s super
Employer super contribution $8,550 $8,550
Plus  salary sacrifice $0 $10,000
Less  contributions tax $1,282 $2,782
Net super contribution $7,268 $15,768

Assumptions: The figures used in this table are estimates only and are based on 2018-19 income tax rates, including the low and middle income tax offset, and a Medicare Levy of 2%. Employer super contributions remain the same after salary sacrifice. In this scenario, John’s take home pay will drop by $6,550.

Maximise your tax savings and combining it with a transition to retirement pension

If you have met your preservation age and are considering a Transition to Retirement Pension (TTR) you could maximise your tax savings and potentially maintain the same take home pay. It is important to note that you will need to meet a condition of release to access your superannuation, hence the importance of seeking financial advice.


[av_hr class=’short’ height=’50’ shadow=’no-shadow’ position=’center’ custom_border=’av-border-thin’ custom_width=’50px’ custom_border_color=” custom_margin_top=’30px’ custom_margin_bottom=’30px’ icon_select=’yes’ custom_icon_color=” icon=’ue808′ font=’entypo-fontello’ av_uid=’av-2a9k6s’ custom_class=” admin_preview_bg=”]

General advice warning

Pacific Wealth Solutions Pty Ltd ACN 606 717 980 is a Corporate Authorised Representative of NEO Financial Solutions Pty Ltd AFSL 385845 | ABN 64 141 607 098. The advice contained within this document does not consider any person’s particular objectives, needs or financial situation. Before making a decision regarding the acquisition or disposal of a Financial Product, persons should assess whether the advice is appropriate to their objectives, needs or financial situation. Persons may wish to make their assessment themselves or seek the help of an adviser. No responsibility is taken for persons acting on the information within this document. Persons doing so, do so at their own risk. Before acquiring a financial product, a person should obtain a Product Disclosure Statement (PDS) relation to that product and consider the contents of the PDS before making a decision about whether to acquire the product.