Tax saving from pre-tax salary sacrifice.
Annual tax saved
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Without sacrifice, tax
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With sacrifice (15% Super)
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The 15 percent versus marginal rate arbitrage
Salary sacrifice into super works because of a single gap. Money you earn as salary is taxed at your marginal rate, which can be 32.5, 37, or 45 percent before the Medicare levy. Money your employer diverts into super before it hits your pay is a concessional contribution, taxed at just 15 percent inside the fund. The difference between your marginal rate and that 15 percent is your saving on every dollar sacrificed. This tool isolates exactly that: how much tax you avoid by sending pre tax salary to super instead of taking it as cash.
Mind the concessional cap
There is a ceiling. All concessional contributions, which includes your employer's compulsory super guarantee plus anything you salary sacrifice, must fit inside the concessional cap of $30,000 for 2025-26. The 12 percent super guarantee on a typical salary already uses a chunk of that, so the amount you can sacrifice is the cap minus what your employer is contributing. Go over the cap and the excess is taxed at your marginal rate with an interest charge, which wipes out the benefit. The tool caps the sacrifice input at $30,000, but you should subtract your existing employer contributions to find your real headroom.
A worked sense of the headroom helps. On a $120,000 salary, the 12 percent guarantee is about $14,400, leaving roughly $15,600 of room to sacrifice before you hit the $30,000 cap. Push your sacrifice up to that limit and you capture the full tax saving without tipping into excess contributions territory. This is why the people who benefit most are mid to high earners with stable incomes who can set and forget a sacrifice amount that lands them just under the cap each year.
Sacrificing $15,000 on a 37 percent rate
Take someone on the 37 percent marginal bracket who sacrifices $15,000 of salary into super. Without sacrifice that $15,000 is taxed at 37 percent. With sacrifice it is taxed at 15 percent inside the fund. The saving is the difference.
| Scenario | Tax on the $15,000 |
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The same $15,000 attracts $5,550 of tax as salary but only $2,250 inside super, a saving of $3,300 every year. The bars below put the two tax bills side by side.
Two things this saving does not show
First, the obvious cost: the sacrificed money is locked in super until you meet a condition of release, generally reaching your preservation age and retiring. Salary sacrifice is a tax efficient way to build retirement wealth, not a way to free up cash now. Second, the Division 293 trap for high earners. If your income plus concessional contributions exceeds $250,000, an extra 15 percent tax applies to the contributions that sit above that line, lifting the rate inside super to 30 percent. The saving is still real at that level, since 30 percent beats a 47 percent marginal rate, but it is smaller than this simple model suggests. A practical tip: if your cash flow is tight, the same tax outcome is available by making a personal deductible contribution and claiming it at tax time, which gives you more control over timing than a fixed payroll arrangement.
Frequently asked questions
Can I carry forward unused cap from earlier years?
Yes, if your total super balance was under $500,000 at the previous 30 June. Unused concessional cap from the past five financial years can be added to this year's $30,000, letting you sacrifice a larger lump sum in a high income year. This is especially useful after a bonus or a capital gain.
Will salary sacrificing lower my compulsory HELP repayment?
No, and this surprises people. Your HELP or HECS repayment is based on repayment income, which adds reportable super contributions back on top of your taxable income. So sacrificing $15,000 into super reduces the income tax you pay but does not shrink the amount counted for your study loan repayment. Salary sacrifice is a tax play, not a way to dodge the loan.
Is salary sacrifice better than after tax contributions?
For most people on a marginal rate above 15 percent, yes, because the contribution goes in before income tax. After tax, non concessional contributions suit those who have used their concessional cap or have a low marginal rate. The right mix depends on your bracket and how close you are to the $30,000 ceiling.