Would paying yourself before tax leave you better off?
Salary sacrificing into super is taxed at 15 per cent, which is below the marginal rate most people pay on the same money as wages.
15%
the tax on money salary sacrificed into super, against your marginal rate on the same money as pay
What this is
Salary sacrifice moves part of your pay into super before income tax touches it. Inside super it is taxed at 15 per cent, which for most employees is lower than the marginal rate the same money would attract as wages, and the difference stays invested instead of being paid as tax. The constraint is the concessional contributions cap, which counts your employer's super guarantee as well as what you sacrifice, so the room available is smaller than the cap looks and shrinks as your salary rises.
Does it apply to you?
- Employees paying more than 15 per cent marginal tax, which is most full-time workers
- Anyone whose pay has risen and who has not rechecked how much cap room is left
- Not people who will need the money before retirement, since it is preserved
How to do it
- Check your marginal tax rate. The saving is the gap between it and 15 per cent, so a higher rate means a bigger gap.
- Check the concessional contributions cap for this year. It includes your employer's super guarantee as well as anything you sacrifice, and it changes: read the current figure rather than one you remember.
- Ask your payroll to set it up. It has to be an arrangement made before the money is earned, not a transfer afterwards.
- Recheck each year, because the cap moves and so does your pay.
Where people lose the money
Transferring money to super from your bank account and calling it salary sacrifice.
It has to be arranged with payroll before the money is earned. A transfer afterwards is a different kind of contribution with different tax.
Forgetting the employer's contributions count towards the cap.
The cap includes the super guarantee. A pay rise increases that and can push you over without any change from you.
Sacrificing money you will need next year.
It is preserved in super. Salary sacrifice is for money you can genuinely leave alone.
Questions
How much tax do I actually save?
The difference between your marginal rate and 15 per cent, on the amount sacrificed. Someone on a 32.5 per cent marginal rate saves 17.5 percentage points on that money; someone on 19 per cent saves four.
What happens if I go over the cap?
Extra tax applies on the excess, which can cancel out the benefit. Because the cap includes your employer's contributions, the safe approach is to check the current cap and subtract what your employer will pay in.
Can I stop it?
Yes. It is an arrangement with your employer and you can change or end it, though it applies to future pay rather than money already earned.
Is this financial advice?
No. It is what ASIC's Moneysmart publishes about how the tax works. Whether it suits your circumstances is a question for a licensed adviser.
Where these numbers come from
- Moneysmart (ASIC), Super contributions · read 2026-09-23
Last gone over 2026-09-23. Figures change; the link above is always the current one.
Published by Income Lab, Melbourne. Responsible for this page: Jarred Krowitz.