When you salary sacrifice to super, your employer pays a portion of your pre-tax salary directly into your super fund instead of to you. Because it never appears on your payslip, the ATO treats that slice as if it was never earned — you only pay 15% contributions tax, not your marginal rate.
- 1. Reduce your taxable income. If you earn $95,000 and sacrifice $10,000, the ATO taxes you on $85,000 — saving you the difference between 30% (your marginal rate) and 15% (super tax) = 15% × $10,000 = $1,500.
- 2. The 15% contributions tax. Your super fund deducts 15% from the sacrifice amount before crediting it. For low earners (<$37,000), the Low Income Super Tax Offset (LISTO) can reimburse this entirely.
- 3. The $30,000 concessional cap. All before-tax super contributions — employer 12% plus salary sacrifice — are capped at $30,000/year (2025–26). Excess is taxed at your marginal rate.
- 4. Arrange it with your employer. Salary sacrifice must be set up before the income is earned (prospective only) and documented in a written agreement with your employer.
- 5. Carry-forward provisions. If your super balance is below $500,000, you can carry forward unused concessional cap space from the previous five years and use it in a single year.