Salary sacrifice: how pre-tax super contributions actually pay off

Salary sacrifice is an agreement with your employer to redirect part of your pay into super before it's taxed. The appeal is a rate arbitrage: instead of your marginal rate (30–47% including Medicare for most full-timers), sacrificed dollars are taxed at 15% inside your fund.

The arithmetic, honestly

On a $90,000 salary, sacrificing $5,000:

• Your taxable income drops to $85,000, saving about $1,600 in tax and Medicare.
• Your take-home falls by about $3,400 — the sacrifice minus the tax saved.
• Your super receives $4,250 — the $5,000 minus 15% contributions tax.

Net position: about $850 ahead for the year, before that $4,250 spends decades compounding. The trade is real, but so is the catch: you've converted spendable money into money you can't touch until retirement. Both movements matter, which is why our calculator shows them separately instead of a single rosy number.

The traps

The concessional cap. Employer SG plus your sacrifice can't exceed $30,000 a year (2025–26) without losing the 15% concession. On $90,000 with 12% SG, that leaves about $19,200 of sacrifice headroom.

HECS and the surcharge still see it. Sacrificed super is a reportable contribution — it comes off your taxable income but is added straight back for HECS repayment income and the Medicare levy surcharge test. Sacrificing won't shrink your HECS bill; it can even coincide with a bigger one if other reportable amounts push you up a band.

Your SG is protected — check anyway. Since 2020 employers must calculate super guarantee on your pre-sacrifice salary. Any arrangement that quietly shrinks your employer contributions is out of order.

FBT-exempt packaging is a different scheme

Hospital and charity (PBI) employees can also package everyday living expenses — mortgage, rent, bills — from pre-tax pay, up to $9,010 (hospitals) or $15,900 (charities) a year, thanks to their employers' fringe benefits tax exemption. It's a different mechanism from super sacrifice with its own catch: packaged amounts are reportable at a grossed-up rate (×1.8868) for HECS and surcharge tests. Still usually worthwhile — but by less than the brochure says if you have a student debt.

Is it right for you?

The tax maths favours sacrifice more the higher your bracket and the further you are from needing the cash. The liquidity cost matters more the younger you are and the tighter your budget. Run your actual numbers in the calculator — then, for a decision this personal, a licensed adviser is the right second opinion. General information only.