Salary Sacrifice Super: How Much Should You Actually Contribute?

Salary Sacrifice Super: How Much Should You Actually Contribute?

You've heard salary sacrifice is one of the smartest tax moves an Australian can make. Maybe your accountant mentioned it. Maybe a colleague boasted about their refund. Maybe your super fund sent a glossy email about "boosting your retirement."

Cool. But how much should you actually salary sacrifice? $50 a fortnight? $500 a month? Maximum cap? The advice you find online usually waves vaguely at the concept without giving you a real number.

This guide cuts straight to the answer. We'll show you exactly how much to sacrifice based on your income, the current rules for 2026, and what the trade-offs really look like before you sign that form with HR.

Quick Answer

Here's what to know about how much to salary sacrifice into super:

• The concessional cap is $30,000 for 2025-26, rising to $32,500 from 1 July 2026

• Your employer's 12% Super Guarantee (SG) counts toward this cap, so subtract that first to find your available room

• A practical starting point: salary sacrifice enough to drop into the next-lower tax bracket

• Higher earners (above $135,000) get the biggest tax savings, but watch Division 293 if income plus contributions exceeds $250,000

• If your super balance is under $500,000, you can use carry-forward unused cap from the past 5 years (subject to current ATO rules)

Bottom line: Salary sacrifice should be calibrated to your income, cashflow, and tax bracket, not picked arbitrarily. Done well, it's the single most tax-effective wealth-building move available to working Australians.

How Salary Sacrifice Actually Works

Salary sacrifice is an arrangement with your employer to redirect part of your pre-tax salary directly into your super fund instead of paying it to you as take-home pay.

Here's why it's powerful:

• The redirected amount is taxed at just 15% inside super (the contributions tax)

• Your marginal income tax rate is usually 30%, 37%, or 45% plus 2% Medicare levy

• The gap between those two rates is your tax saving, every dollar, every year

Three things to understand before you start:

1. Salary sacrifice is separate from your employer's 12% SG, but both count toward the same cap

2. Contributions are locked in super until you reach preservation age (60 for most people)

3. Your take-home pay drops by less than the sacrifice amount because you pay less tax

Bottom line: Salary sacrifice is essentially the government letting you swap your top-bracket tax rate for 15%. The catch is your money is locked away until 60.

The Concessional Cap: Your Total Limit

The concessional contributions cap is the most important number in this whole conversation. Exceed it and you pay extra tax plus paperwork hassle.

Here's how SG eats into your cap at different incomes:

• $80,000 salary: Employer SG = $9,600.     Cap space remaining = $20,400

• $100,000 salary: Employer SG = $12,000. Cap space remaining = $18,000

• $120,000 salary: Employer SG = $14,400. Cap space remaining = $15,600

• $150,000 salary: Employer SG = $18,000. Cap space remaining = $12,000

• $200,000 salary: Employer SG = $24,000. Cap space remaining = $6,000

Notice the pattern: the higher your income, the less salary sacrifice room you have because SG fills more of the cap. This is why non-concessional contributions and carry-forward matter for higher earners.

Bottom line: Always start by subtracting your SG from the cap to find your real sacrifice ceiling. Many Australians overshoot the cap by accident.

How Much Should I Sacrifice at Each Income Level?

Here's where rubber meets road. The answer depends on your marginal tax rate.

If you earn $45,000 to $80,000

At a 30% marginal rate (effectively, after the 2026-27 second-bracket rate drop), salary sacrifice still beats keeping the money. But the gap (30% vs 15%) is smaller, so don't sacrifice so aggressively that your cashflow suffers.

• Practical target: Sacrifice $3,000 to $8,000 per year

• Tax saving on $5,000 sacrifice: roughly $750 per year

• Watch for: Government co-contribution if you're under $60,400 income (verify current ATO threshold)

If you earn $80,000 to $135,000

This is the sweet spot. Marginal rates of 30% to 37% mean meaningful savings, and you've still got room above SG.

• Practical target: Sacrifice $8,000 to $15,000 per year

• Tax saving on $10,000 sacrifice: roughly $1,500 to $2,200 per year

• Watch for: The cap. Don't accidentally combine SG + sacrifice + bonuses past $30,000

If you earn $135,000 to $250,000

At a 37% to 45% marginal rate, salary sacrifice is highly effective. The argument for maxing the cap each year is overwhelming.

• Practical target: Max the cap ($30,000 in 2025-26, $32,500 from 1 July 2026)

• Tax saving on full sacrifice: $5,000 to $10,000+ per year

• Watch for: Division 293 territory if you're approaching $250,000 combined income

If you earn over $250,000

Division 293 tax kicks in. An extra 15% applies to contributions where your income plus concessional contributions exceeds $250,000, taking your total contributions tax to 30%.

• Practical target: Still max the cap. Even at 30%, you're better off than at the 47% top marginal rate

• Net saving on full sacrifice at top rate: still around 17 cents per dollar

• Watch for: The Division 293 threshold has not been indexed and isn't changing in 2026-27

Bottom line: Most Australians earning above $80,000 should be salary sacrificing meaningfully. Most aren't.

The Carry-Forward Rule: A Window That's Closing

If your total super balance was under $500,000 at 30 June of the previous financial year, you can use unused concessional cap from the past 5 financial years on top of your current cap.

Here's the urgent bit: unused cap from 2020-21 expires on 30 June 2026. After that date, those amounts are gone permanently.

For someone who only had SG contributions in 2020-21 (when the cap was $25,000), that could be $10,000 to $20,000 of unused cap available right now.

How to check your carry-forward room:

1. Log into myGov and navigate to the ATO section

2. Click Super then Information

3. Look for Carry-forward concessional contributions

4. The number shown is your available unused cap from prior years

Bottom line: If your balance is under $500,000 and you've had quiet contribution years, check your carry-forward before 30 June 2026. It's free money you're allowed to use.

Practical Examples

Example 1: Sarah, 35, Earning $95,000

Sarah earns $95,000 as a marketing manager. Her employer pays $11,400 in SG, leaving $18,600 of cap space.

Her strategy:

• Salary sacrifice $10,000 per year ($385 per fortnight)

• This drops her taxable income to $85,000

• At a 30% marginal rate, she saves $3,000 in income tax

• She pays $1,500 in contributions tax inside super (15% on the $10,000)

• Net tax saving: $1,500 per year

Her take-home pay drops by $8,500 per year (about $327 per fortnight) but she's redirecting $10,000 into super. Over 30 years compounding at 7% net, that's an extra $945,000+ at retirement.

Example 2: David, 48, Earning $185,000

David earns $185,000 as an engineering manager. His employer pays $22,200 in SG, leaving $7,800 of cap space in 2025-26.

His situation is more complex because he has a super balance of $410,000 (under the $500,000 carry-forward threshold) and three years of unused cap.

His strategy:

• Salary sacrifice the full $7,800 to max the current year's cap

• Use carry-forward contributions of $22,000 as a personal deductible contribution before 30 June 2026

• Combined deductible contributions for the year: $29,800

• At a 37% marginal rate, he saves roughly $11,000 in tax this year

After 30 June 2026, the new $32,500 cap kicks in and his SG of around $22,200 leaves $10,300 of cap space, which he plans to fully utilise going forward.

Common Mistakes to Avoid

1. Forgetting your employer's SG. Sacrificing $30,000 when your SG is already $12,000 means you've blown the cap by $12,000. Excess contributions get added to your taxable income and taxed at your marginal rate.

2. Sacrificing too aggressively when you have a mortgage. Super is locked until 60. If you've got a 5%+ home loan and sacrificing leaves you cashflow-stressed, the maths might favour the mortgage instead.

3. Ignoring the carry-forward window. Your 2020-21 unused cap expires 30 June 2026. After that, it's gone forever. Most people have no idea this rule exists.

4. Setting and forgetting. Salary sacrifice arrangements should be reviewed every year. Pay rises, bonuses, and SG indexation can all push you over the cap if you're not paying attention.

5. Confusing salary sacrifice with non-concessional contributions. They have different caps and different tax treatments. Mixing them up is one of the most expensive errors people make.

6. Not checking your contract's "TRP vs salary plus super" wording. If your contract says "total package inclusive of super," your sacrifice maths is different than if it says "salary plus super." Check before you set the amount.

7. Trying to sacrifice a bonus you've already received. Salary sacrifice must be agreed before the income is earned. You can't retroactively redirect a bonus that's already been paid.

FAQ

What's the maximum I can salary sacrifice in 2025-26? Your concessional cap is $30,000, which includes your employer's SG. Subtract your annual SG from $30,000 to find your maximum salary sacrifice. From 1 July 2026, the cap rises to $32,500.

Is salary sacrifice better than putting money into my mortgage? Depends on your interest rate, age, and tax bracket. At a 30% marginal rate with a 6% mortgage, the maths is genuinely close. At a 45% marginal rate, salary sacrifice usually wins comfortably. Run the numbers or ask an adviser.

Can I salary sacrifice and still get the government co-contribution? Yes, but the co-contribution is for personal after-tax (non-concessional) contributions, not salary sacrifice. If your income is under around $60,400 (verify current ATO threshold), making after-tax contributions can attract up to $500 in matching from the government.

Does salary sacrifice affect my employer's SG? It shouldn't. Your employer must still pay 12% SG on your full ordinary time earnings, including the sacrificed portion. If your contract says otherwise, push back.

What happens if I exceed the concessional cap? The excess is added to your taxable income and taxed at your marginal rate, with a 15% offset for tax already paid in super. You can choose to release the excess from super to pay the bill. It's not catastrophic, but it's avoidable.

Should I salary sacrifice if I'm planning to buy a house? Be cautious. Super is locked until preservation age, so sacrificing aggressively while saving for a deposit can leave you cash-poor. Look into the First Home Super Saver Scheme as an alternative way to use super for a deposit (subject to current ATO rules).

Can my employer refuse to set up salary sacrifice? Technically yes, but most employers offer it routinely. If yours refuses, you can achieve the same outcome with personal deductible contributions (paid from your bank account, then claimed as a deduction in your tax return).

Ready to Get the Most From Your Super?

Salary sacrifice is one of those strategies where a 30-minute conversation can save you thousands per year. Book a free 15-minute consultation with the team at What If Advice and find out exactly how much you should be sacrificing based on your income, balance, and goals.

No pressure, no jargon. Visit whatifadvice.com.au to book.

General Advice Disclaimer: This information is general in nature and does not take into account your personal financial situation, needs, or objectives. You should consider whether it is appropriate for you and seek personal financial advice before making any decisions.