Salary sacrifice is one of the simplest, most reliable tax breaks available to working Australians — yet plenty of people never switch it on. The idea is straightforward: you agree with your employer to redirect some of your before-tax pay straight into super, where it's taxed at just 15% instead of your usual marginal rate.
This is a plain-English guide to how it works in the 2026–27 financial year, with worked examples, simple charts, and — just as important — the traps that stop it being a good idea for everyone. It pairs with our guide to the 2026–27 contribution cap increases.
Why it works: 15% vs your marginal rate
Every dollar of ordinary salary is taxed at your marginal rate — which, once you add the 2% Medicare levy, runs from 0% up to 47%. But an employer super contribution — including salary sacrifice — is a "concessional" contribution, taxed at a flat 15% going into the fund. If your marginal rate is higher than 15% (it is, for most people earning above $18,200), sacrificing turns the difference into extra savings instead of tax.
Here are the numbers that matter this year:
| What | 2026–27 |
|---|---|
| Concessional (before-tax) contributions cap | $32,500 |
| Tax on contributions within the cap | 15% |
| Compulsory Super Guarantee rate | 12% |
| Division 293 (extra 15%) applies if income + contributions exceed | $250,000 |
The $32,500 cap covers all your concessional contributions combined — compulsory SG, salary sacrifice and any personal contributions you claim a deduction for.
Worked example: the everyday case
Priya earns $95,000, putting her on a 32% marginal rate (30% + Medicare). She decides to salary sacrifice $10,000 over the year.
- If she takes it as pay: $10,000 is taxed at 32% → $3,200 tax, leaving $6,800 in her pocket.
- If she sacrifices it: $10,000 goes into super taxed at 15% → $1,500 tax, leaving $8,500 invested for her.
Same $10,000 of earnings — but $1,700 more ends up working for Priya's future instead of going to the ATO. (Her compulsory SG of $11,400 plus the $10,000 sacrifice totals $21,400, comfortably under the $32,500 cap.)
The higher your rate, the bigger the win
Because the saving is the gap between your marginal rate and 15%, salary sacrifice rewards higher earners more — up to a point. The chart below shows how much extra ends up invested for every $10,000 sacrificed, by income band.
Note the drop on the right: once your income plus concessional contributions tops $250,000, Division 293 charges an extra 15%, lifting your contributions tax to 30%. Salary sacrifice still helps — 30% beats 47% — but the edge narrows.
Mind the cap — your compulsory super is already in it
The single most common mistake is forgetting that your employer's compulsory 12% Super Guarantee also counts toward the $32,500 concessional cap. Salary sacrifice sits on top of it, so your room is whatever's left.
Marcus earns $130,000 and wants to sacrifice $20,000. But his compulsory SG is already 12% × $130,000 = $15,600. That leaves only $16,900 of cap room — so a $20,000 sacrifice would push him $3,100 over. Contributions above the cap are taxed at his marginal rate (and can create extra admin), wiping out the benefit on that slice.
One useful wrinkle: if your total super balance was under $500,000 on 30 June, you may be able to carry forward unused cap amounts from the previous five years — handy in a year you've got extra to contribute, such as after selling an asset or receiving a bonus.
When salary sacrifice is not a clear win
It's a great tool, but not for everyone, all the time:
- Lower incomes. If your marginal rate is already at or near 15%, there's little tax saving. For incomes up to $37,000 the Low Income Super Tax Offset (LISTO) refunds up to $500 of contributions tax, but the case for sacrificing is weaker — and keeping the cash may matter more.
- You need the money sooner. Super is preserved — generally you can't touch it until age 60 and retirement. Don't sacrifice cash you'll need for a home deposit, emergencies or short-term goals.
- You're near the cap already. High SG plus sacrifice can tip you over $32,500 — check your room first.
- Your budget is tight. Sacrifice reduces your take-home pay today. It should be money you genuinely don't need now.
Salary sacrifice is a decision about timing and tax, not just returns. It shines when your marginal rate is well above 15% and you're comfortable locking the money away until retirement.
Where advice fits
The maths here is deliberately simplified — a large sacrifice can dip into a lower tax bracket, everyone's cap room differs, and there's interplay with things like capital gains and government benefits. A licensed financial adviser or registered tax agent can work out the right amount for your income, your cap and your cash-flow, and make sure you don't accidentally breach the limit. Start with the plain-English basics on our superannuation page.