Salary Sacrifice Into Super: What It Saves at Your Tax Rate

Salary sacrifice is a trade between two tax rates. Under an arrangement with an employer, part of a person’s pre-tax pay goes into their super fund instead of their bank account; according to the Australian Taxation Office, that amount is then taxed at 15% inside the fund rather than at the person’s marginal rate plus the Medicare levy. Whether the trade is worth making depends almost entirely on the size of the gap between those two rates, and the gap is different for every income. The calculator below works it out from your own salary, using the ATO’s 2026-27 resident rates, before the rest of this article explains what the number includes and, just as importantly, what it leaves out.

How the saving works

The mechanism is narrower than the enthusiasm around it suggests. The ATO sets out four features of an effective salary sacrifice arrangement into super, and each of them matters to the arithmetic.

First, the sacrificed amount is not counted as assessable income, so it is not subject to PAYG withholding when it leaves the pay run. Second, it is taxed at 15% when it arrives in a complying super fund, as a concessional contribution. Third, the ATO does not treat it as a fringe benefit. Fourth, and this is the point that surprises people, the employer must still pay the full super guarantee as though no sacrifice existed, and the sacrificed amount does not count towards the employer’s super guarantee obligation.

The fourth feature closes off an outcome that would otherwise erode the benefit. An employer cannot reduce its own compulsory contribution by pointing to the money the employee has chosen to redirect. The guarantee is calculated separately, and from 1 July 2025 the ATO sets the rate at 12%.

What remains is a straightforward comparison. Every dollar sacrificed avoids the marginal rate and the levy on the way in, and incurs 15% on arrival in the fund. The difference is the saving.

The saving by tax bracket

The ATO’s resident tax rates for 2026-27 place an individual in one of five brackets. The table below adds the 2% Medicare levy to each marginal rate and compares the total with the 15% contributions tax, expressed as the dollars saved for every $100 sacrificed from the top of a person’s income.

Two points the table does not make on its own deserve stating.

The first concerns the two lowest rows. Below the tax-free threshold, sacrifice turns money that would have been untaxed into money taxed at 15%, so the arrangement costs rather than saves. In the 15% bracket the gap narrows to about 2 cents in the dollar, which is close enough to nothing that the restrictions on access, discussed below, will usually outweigh it. The ATO’s low income super tax offset is a separate matter that can affect lower earners, and it is not computed in this table or in the calculator.

The second concerns the levy. The 2% Medicare levy is the standard rate; people on lower incomes may pay a reduced levy or none, which would shrink the saving in the lower brackets further. The calculator applies a flat 2% and says so.

A worked example clarifies the mechanics. A person earning $90,000 who sacrifices $10,000 a year drops their taxable income to $80,000, which remains inside the 30% bracket. Their income tax falls by $3,000 and their Medicare levy by $200, a total of $3,200. The fund deducts $1,500 in contributions tax. The net saving is $1,700 a year. Their take-home pay falls by $6,800 rather than the full $10,000, and their super balance rises by $8,500. Those figures are produced directly from the ATO’s 2026-27 rates; they are not projections of investment returns, which are a different question entirely.

The concessional contributions cap

The saving is bounded from above. The ATO sets the general concessional contributions cap at $32,500 for 2026-27, up from $30,000 in 2024-25 and 2025-26. Salary sacrifice is one of several contributions that count towards it, and the full list matters:

1. the employer’s super guarantee contributions
2. salary sacrifice contributions
3. personal contributions for which the person claims a tax deduction

All of a person’s super funds are added together for the purpose of the cap. Someone who holds two accounts, or whose employer pays into one fund while they make personal contributions into another, needs to count both.

The super guarantee is the term that catches people. On a salary of $90,000, a 12% guarantee is $10,800 before the person has sacrificed anything, which leaves $21,700 of the 2026-27 cap. On a salary of $200,000, the guarantee alone is $24,000, and the remaining room is $8,500. The calculator adds all three components and reports the total against the cap.

Carry-forward contributions

The cap is not always a hard annual ceiling. The ATO allows unused concessional cap amounts to be carried forward, subject to three conditions:

1. the person’s total superannuation balance was under $500,000 at 30 June of the previous financial year
2. only unused amounts from 2019-20 onwards are available
3. each unused amount can be carried forward for five years, after which it expires

The arrangement is designed for irregular contribution histories. A parent returning to work after several years of reduced hours, or a contractor whose income varies considerably from year to year, may have accumulated unused cap space that allows a larger contribution in a high-income year. Timing matters here, because the cap is measured one financial year at a time, and the weeks before 30 June are where most of the planning happens. Our earlier piece on handling tax without last-minute stress covers the habit of working on the year before it closes rather than after.

The calculator flags an amount that exceeds the general cap but does not attempt to assess carry-forward eligibility. That assessment depends on a balance history the calculator does not have, and a person’s fund or the ATO’s own online services are the place to confirm it.

Division 293

At the top of the income range a second limit applies. The ATO levies Division 293 tax, an additional 15% on concessional contributions, where a person’s combined income and concessional contributions exceed $250,000. For a high earner affected by it, the tax on contributions caught by the rule can reach 30% rather than 15%, and the saving in the bottom row of the table above narrows accordingly.

The rules for calculating the precise amount are detailed, and the calculator does not compute them. It displays a notice when the salary entered plus the amount sacrificed exceeds $250,000, and leaves the calculation to the ATO’s assessment. A person in that position is likely to have other matters that justify professional advice; our guide to choosing a tax agent sets out what to look for.

What the arithmetic does not price

The calculator measures one thing precisely: the tax difference. Three costs fall outside it.

1. Access is restricted. Money contributed to super is preserved until the person meets a condition of release. This article does not state a preservation age, and the reader should confirm the conditions that apply to them with their fund. A tax saving of $1,700 a year is not available to spend on anything until then.
2. Take-home pay falls. In the worked example, take-home pay drops by $6,800 a year. That reduction affects household cash flow, and it can affect a lender’s assessment of borrowing capacity at the moment a person is applying for a mortgage.
3. Other entitlements may move. Some employers calculate other entitlements, such as bonuses or certain allowances, on the salary after sacrifice. Whether that applies depends on the employment agreement, and the agreement is the document to check before signing a sacrifice arrangement.

The question that recurs most often in discussions of salary sacrifice is whether the money is better directed at a mortgage. The arithmetic can describe both sides of that trade without settling it. Sacrifice offers a known, immediate tax gap at the person’s marginal rate; extra mortgage repayments offer a guaranteed reduction in interest and money that remains accessible through redraw or offset arrangements. Which outcome is preferable depends on interest rates, the person’s age, the security of their income and their plans, none of which a calculator can weigh.

What the arithmetic leaves to you

The calculator answers one question: at this income and this sacrifice, what is the tax difference, and where does the total sit against the cap? Running it with your own figures is the first step. The second is to confirm your concessional contributions so far this year with your fund, because employer contributions arrive on the employer’s schedule rather than yours. The third, for anything beyond arithmetic, is a licensed financial adviser.

What the sacrifice builds towards is a balance, and our piece on how much super you should have by age sets out the benchmarks for where that balance might reasonably sit. None of this article is financial advice; it describes the ATO’s rates and rules as published for 2026-27.

Sources: Salary sacrificing super, Australian Taxation Office (https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/growing-and-keeping-track-of-your-super/how-to-save-more-in-your-super/salary-sacrificing-super); Contributions caps, Australian Taxation Office (https://www.ato.gov.au/tax-rates-and-codes/key-superannuation-rates-and-thresholds/contributions-caps); Tax rates for Australian residents, Australian Taxation Office (https://www.ato.gov.au/tax-rates-and-codes/tax-rates-australian-residents)