How Salary Sacrifice into Super Works

Salary sacrifice is an arrangement where you ask your employer to divert some of your pre-tax salary directly into your superannuation fund. The ATO treats these contributions as "concessional" contributions — the same category as your employer's Super Guarantee payments.

The key tax advantage is significant. Your salary sacrifice contributions are taxed at just 15% inside your super fund, instead of at your marginal income tax rate which could be 16%, 30%, 37%, or even 45%. For someone earning $100,000 in the 30% bracket, salary sacrificing $10,000 saves $1,500 in tax compared to receiving that money as cash.

Your employer must pay these amounts into your super fund at least quarterly, and from 1 July 2026 (Payday Super reforms), they'll need to pay it on each payday alongside your salary. You can set up salary sacrifice through a formal arrangement with your employer — they don't have to agree to it, but most do.

How After-Tax (Non-Concessional) Super Contributions Work

After-tax contributions, officially called non-concessional contributions, are money you put into your super fund from income that has already been taxed. Because this money has already passed through the tax system, it isn't taxed again when it enters your super fund.

You make after-tax contributions by transferring money directly from your bank account to your super fund. The ATO caps these contributions at $120,000 per financial year. If you're under 75, you can also use the "bring-forward" rule to contribute up to $360,000 over three years in a single lump sum.

After-tax contributions don't reduce your taxable income for the year, so they don't change how much income tax or Medicare levy you pay. However, any investment earnings those contributions generate inside super are still taxed at the concessional 15% rate (or 0% in pension phase).

Salary Sacrifice vs After-Tax Super: Side-by-Side Comparison

Tax Savings: Real Example with $190,000 Salary

Let's compare the outcomes for someone earning $190,000 who wants to contribute $20,000 extra to super. Under salary sacrifice, the $20,000 is taken from pre-tax income. Your taxable income drops to $170,000, saving you $7,400 in income tax (37% marginal rate × $20,000) plus $400 in Medicare levy (2% × $20,000). The $20,000 is then taxed at 15% ($3,000) inside super — a total tax saving of $4,800.

With after-tax contributions, you simply transfer $20,000 from your bank account to super. Your tax bill stays exactly the same because your taxable income doesn't change. The full $20,000 goes into super with no further tax. The downside is you had to earn roughly $31,750 pre-tax to have $20,000 after taxes and Medicare at the 37% bracket.

Use our salary sacrifice calculator to see the exact savings for your income level. Compare this with our take-home pay calculator to see how salary sacrifice changes your net pay.

When Salary Sacrifice Wins

Salary sacrifice is the better choice in most scenarios. The fundamental maths is simple: if your marginal tax rate (including Medicare levy) is higher than 15%, you save money by using concessional contributions.

For someone earning $60,000, the marginal rate is 16% plus 2% Medicare levy = 18%. Salary sacrificing $5,000 saves $900 in tax (18% × $5,000) and costs $750 inside super (15% × $5,000) — a net gain of $150. For someone earning $135,000, the marginal rate is 37% plus 2% = 39%. Salary sacrificing $10,000 saves $3,900 and costs $1,500 — a net gain of $2,400.

Salary sacrifice also reduces your taxable income, which can lower your Medicare Levy Surcharge liability if you're in the MLS income brackets. Use our MLS calculator to check whether salary sacrifice pushes you below the MLS threshold.

However, salary sacrifice does NOT reduce your income for HECS-HELP repayment purposes. The ATO adds back your salary sacrifice contributions when calculating your repayment income. Check our HECS repayment calculator to see your obligations.

When After-Tax Contributions Win

After-tax contributions make sense in specific situations. If you've already hit your $30,000 concessional cap (including your employer's Super Guarantee), salary sacrifice isn't an option without paying excess contributions tax. In that case, after-tax contributions let you keep saving into super.

Low-income earners benefit from the government's super co-contribution scheme. If you earn under $43,445 and make after-tax contributions, the government contributes up to 50 cents for every dollar you put in, up to $500 per year. This co-contribution is only available for after-tax contributions, not salary sacrifice.

If you're saving for your first home through the First Home Super Saver (FHSS) Scheme, both types of contributions work, but salary sacrifice is more efficient because the FHSS withdrawal includes the tax savings. After-tax contributions are still eligible for FHSS release, though.

Frequently Asked Questions

Can I do both salary sacrifice and after-tax contributions in the same year?

Yes. You can use both strategies simultaneously as long as you stay within each cap. The concessional cap ($30,000) covers your employer SG contributions plus any salary sacrifice, and the non-concessional cap ($120,000) covers after-tax contributions. Just be careful not to exceed either limit, as excess contributions incur penalty tax rates.

Does salary sacrifice affect my super guarantee?

No. If your salary sacrifice agreement reduces your "salary or wages" below the SG base, your employer must still pay the 12% Super Guarantee on your original salary (before sacrifice) under ATO rules. Most modern agreements explicitly state that SG is calculated on your pre-sacrifice salary to avoid this trap.

What happens if I exceed the $30,000 concessional cap?

Excess concessional contributions are included in your assessable income and taxed at your marginal rate, plus an excess concessional contributions charge. You also get a 15% tax offset for the contributions tax already paid inside super. It's best to track your contributions carefully throughout the year.

Can I claim a tax deduction for after-tax super contributions?

Yes, this is a third option called a "personal deductible contribution." If you're self-employed or your employer doesn't offer salary sacrifice, you can make after-tax contributions and claim a tax deduction by lodging a 'Notice of Intent to Claim' form with your super fund. The contributions then count toward your concessional cap.

Is there a minimum age for salary sacrifice into super?

You can salary sacrifice into super at any age if you're employed. However, to make personal deductible contributions (after-tax contributions you later claim as a deduction), you generally need to be under 75. If you're 67-74, you must meet the work test (40 hours in 30 consecutive days) to make voluntary contributions.