Salary sacrifice

What is salary sacrifice?

Salary sacrifice contributions to super are before-tax (or “concessional”) superannuation contributions. 

With your employer, you may be able to arrange to "sacrifice" part of your normal salary (before tax) to be paid directly into your super. Not only is this a convenient way of setting up regular additional payments into your super, but you can also save on tax.

Savings and tax benefits of salary sacrifice

There are considerable savings and tax benefits of salary sacrifice: 

  • If you salary sacrifice, you will reduce your normal income. This may also reduce the amount of income tax you pay.
  • You increase your super savings, giving you more money in retirement

How to set up salary sacrifice 

  • Check with your employer if you can salary sacrifice
  • Calculate how much and how often you would like to make contributions
  • Get financial advice to make sure salary sacrifice is right for you
  • Complete a salary sacrifice agreement form and pass onto your employer to complete.


Super contribution limits

There are limits on how much you can contribute through salary sacrifice. If you go over the limit, you will start to pay extra tax.  

Contribution limits 2017 - 2018

  • For the 2017 - 2018 financial year, the concessional cap is $25,000 for all individuals regardless of age.

How "concessional" contribution limits work

Salary sacrifice contributions are known as "concessional contributions". Concessional contributions also include the Super Guarantee contributions paid by your employer. Both salary sacrifice and your Super Guarantee contributions count towards your overall concessional contributions. 

So, if you are wanting to sacrifice large sums or set up a monthly direct debit, you will need to take into consideration the contributions made by your employer to ensure you stay within the concessional tax limits.