Salary sacrificing into super: how it works and the 2025-26 caps

Trade your top tax rate for a flat 15% — here's exactly what salary sacrificing into super saves you, and the 2025-26 caps that limit it.

By ECTD Editorial · Published 2026-04-23 · Updated 2026-04-23

Salary sacrificing into super is one of the few legal moves that lets an ordinary wage earner pay tax at 15% instead of their usual marginal rate. You agree to send part of your pay into your super fund before it hits your bank account, and the money is taxed at the flat contributions rate on the way in rather than at your income tax rate. For someone in the 30% or 37% bracket, that gap is real money — and the rules around how much you can do it changed again for the 2025-26 financial year.

What salary sacrifice actually is

A salary sacrifice arrangement is a deal you make with your employer: you give up part of your before-tax salary, and in exchange your employer pays that amount straight into your super fund. Because the money never lands in your pay packet, it never gets taxed at your marginal income tax rate. Instead it's treated as a concessional (before-tax) contribution and taxed at 15% inside the fund.

This is different from making a personal contribution from your already-taxed take-home pay. Both can end up as concessional contributions — a personal contribution becomes concessional only if you claim a tax deduction for it — but salary sacrifice handles the tax saving automatically at the source. There's no waiting until tax time to get money back; you simply see less tax taken out of each pay.

It's also separate from the compulsory super your employer already pays. The Superannuation Guarantee — the legally required employer contribution that sits at 12% of your ordinary earnings from 1 July 2025 — counts toward the same annual cap as your salary sacrifice, which matters a lot for how much room you actually have. We'll come back to that.

The core idea in one sentence: You're swapping your top tax rate (which could be 30%, 37% or 45%) for a flat 15% — the difference is the saving, and it lands in your retirement balance instead of the ATO's pocket.

The 2025-26 concessional contributions cap

There's a limit on how much you can put in at the concessional 15% rate each year. For the 2025-26 financial year the concessional contributions cap is $30,000. This is the combined total of everything that goes in before tax: your employer's compulsory Super Guarantee, any salary sacrifice you arrange, and any personal contributions you later claim a deduction for.

That combined nature trips people up. If you earn $120,000, your employer is already tipping in roughly $14,400 a year in compulsory super (12% of $120,000). That eats into your $30,000 cap before you've sacrificed a cent — leaving you about $15,600 of headroom to salary sacrifice, not the full $30,000.

Start with the cap: $30,000 for 2025-26.
Subtract your employer's compulsory Super Guarantee for the year (12% of your ordinary time earnings).
Subtract any personal deductible contributions you plan to claim.
What's left is roughly how much you can salary sacrifice without going over.

Going over the cap has a cost: Contributions above the cap aren't blocked — they're allowed in but taxed differently. Excess concessional contributions get added to your assessable income and taxed at your marginal rate (with a 15% offset for the tax already paid in the fund), plus an interest-style charge. It's not a disaster, but it removes the benefit. Check your latest payslips and any prior contributions before setting an amount.

Why 15% beats your marginal rate

Australia's 2025-26 resident income tax brackets are: nothing on the first $18,200; 16% from $18,201 to $45,000; 30% from $45,001 to $135,000; 37% from $135,001 to $190,000; and 45% above $190,000. (Most people also pay the 2% Medicare levy on top.)

Every dollar you salary sacrifice is a dollar that would otherwise have been taxed at your highest bracket — the marginal rate — because it's the top slice of your income. So the saving per dollar is the gap between your marginal rate and the 15% contributions tax:

In the 30% bracket: you save 15 cents in tax on every dollar sacrificed (30% minus 15%), plus the 2% Medicare levy that dollar would have attracted.
In the 37% bracket: you save 22 cents per dollar (37% minus 15%), plus Medicare.
In the 45% bracket: you save 30 cents per dollar (45% minus 15%), plus Medicare — though high earners need to watch Division 293, below.
In the 16% bracket: the gap is only 1 cent, so the tax benefit is thin — salary sacrifice usually isn't the right tool on a low income, and the government co-contribution or spouse strategies may suit better.

The trade-off is access. Money inside super is preserved — you generally can't touch it until you reach your preservation age and meet a condition of release (typically retirement, or turning 65). So the 15% saving comes with the catch that the money is locked away for the long haul. That's fine if it's genuinely long-term retirement money; it's a problem if you might need it next year.

A worked example: $90,000 salary

Take Priya, who earns $90,000 a year. At that income her top dollars sit in the 30% bracket. Her employer pays 12% compulsory super — about $10,800 — which already counts toward her $30,000 cap, leaving roughly $19,200 of concessional headroom.

Say she decides to salary sacrifice $10,000 over the year (about $385 per fortnight). Here's what happens to that $10,000:

If she took it as cash: the $10,000 would be taxed at her 30% marginal rate plus 2% Medicare levy = $3,200 in tax. She'd keep $6,800 in hand.
If she salary sacrifices it: the $10,000 goes into super and is taxed at 15% on the way in = $1,500. So $8,500 lands in her super balance.
The difference: $8,500 invested for retirement versus $6,800 spent now — a $1,700 swing in her favour, purely from the tax treatment.

That $1,700 is the Medicare-inclusive saving (the 32% she'd have paid as cash minus the 15% the fund pays). It's not a rebate she has to chase at tax time — it's baked into the fact the money never got taxed at her marginal rate. And because $8,500 a year, compounded inside a low-tax super environment over a couple of decades, grows into a meaningfully larger sum than $6,800 spent today, the long-run gap is far bigger than the headline $1,700.

Run your own numbers: Your saving depends entirely on your marginal rate, which depends on your total taxable income. Before committing to a sacrifice amount, work out which bracket your top dollars fall in so you know the size of the 15% gap you're capturing.

What it does to take-home pay

Sacrificing $10,000 a year does not cut Priya's take-home pay by $10,000. Because she's no longer paying tax on that slice, her after-tax pay drops by closer to $6,800 over the year — the amount she would have actually pocketed. The other $3,200 was money the ATO was going to take anyway; she's redirected $1,700 of that into her own super and the rest stays as the fund's 15% tax. Framed that way, the cost of building the balance is smaller than it first looks.

Carry-forward: using up unused cap from past years

If you haven't used your full concessional cap in recent years, you may be able to carry forward the unused amount and make a larger contribution now. The rules let you use unused cap amounts from the previous five financial years, on a rolling basis, provided your total super balance was under $500,000 at the end of the prior 30 June.

This is genuinely powerful for people with uneven income or career breaks. Someone returning from parental leave, a contractor who has a big-income year, or anyone who sells an asset and faces a capital gains tax bill can pull forward several years of unused cap and make one large deductible contribution — potentially tens of thousands of dollars taxed at 15% instead of their marginal rate.

Check your carry-forward balance on myGov: The ATO tracks your unused concessional cap. Log in to your myGov account linked to the ATO, go to Super, and look at your concessional contributions to see how much carried-forward room you have. It's the single fastest way to know whether a big one-off contribution is on the table this year.

Division 293: the high-income catch

There's an important wrinkle for higher earners. Division 293 is an extra 15% tax on concessional contributions for people whose combined income and concessional contributions exceed $250,000 in a year. If you're caught by it, the tax on the relevant contributions effectively doubles from 15% to 30%.

Even at 30%, salary sacrifice can still beat the 45% top marginal rate plus Medicare — so it isn't necessarily a reason to stop. But it changes the maths, and the saving per dollar shrinks. If your income is near or above $250,000, the threshold counts your taxable income plus your concessional contributions together, so even someone earning a bit under $250,000 can be pushed over once their contributions are added in. This is the point where the spreadsheet stops being simple and personal advice earns its fee.

Who salary sacrifice actually suits

It isn't a universal win. The benefit scales with your tax rate and your ability to lock money away. As a rough guide:

Strong fit: middle-to-higher earners in the 30% or 37% bracket who have stable income, an emergency buffer outside super, and don't need the money before retirement.
Worth a close look: people with carried-forward unused cap, anyone facing a one-off capital gains tax bill, and those a few years from retirement wanting to top up.
Probably not yet: lower earners in the 16% bracket (the 15% gap is tiny), anyone saving for a near-term goal like a house deposit, and people without a cash safety net — though note the First Home Super Saver Scheme is a separate, deliberate exception for deposit savers.
Tread carefully: very high earners hit by Division 293, and anyone already near the $30,000 cap from employer contributions alone.

How to set it up

Salary sacrifice must be arranged prospectively — you agree to it before you earn the income, not retrospectively on pay you've already received. The practical steps are short:

Work out your headroom: $30,000 cap minus your expected employer Super Guarantee for the year.
Decide an amount you can comfortably live without each pay, keeping a cash buffer outside super.
Put a salary sacrifice request to your employer or payroll in writing, specifying the dollar amount or percentage and the start date.
Confirm your fund details are current so the money lands in the right account.
Review it each year — the cap, the Super Guarantee rate, and your income all change, so an amount that fit last year may need adjusting.

One thing to confirm with your employer: that salary sacrificing won't reduce the base they use to calculate your compulsory Super Guarantee. Reputable employers calculate the 12% on your pre-sacrifice salary, but it's worth getting in writing so you're not quietly losing employer super to gain it back yourself.

Finally, keep an eye on the cap as a household, not just per payslip. If you have multiple jobs, every employer's compulsory contribution counts toward the same single $30,000 cap — it's easy to breach it without noticing when contributions arrive from two payrolls.

General advice warning: This article is general information only and does not take into account your personal circumstances, objectives or financial situation. It is not personal financial or tax advice. Super, contribution caps and tax rules are complex and change over time — confirm current figures with the ATO and consider speaking to a licensed financial adviser or registered tax agent before acting.

General information only — not personal financial, tax, legal or medical advice. Consider your own situation and consult a licensed professional before acting. Figures are current as at the date shown above.