How Much Should I Salary Sacrifice Into Super? A Guide Based on Your Pay

Understanding salary sacrifice into super

Salary sacrifice is an arrangement where you agree to forgo part of your pre-tax salary in exchange for your employer paying that amount into your superannuation fund. It's a way to boost your retirement savings while reducing your taxable income. But how much should you salary sacrifice? The answer depends on your gross pay, your tax bracket, and your personal financial goals.

The key benefit is the difference between your marginal income tax rate and the 15% tax on super contributions (within the concessional cap). For someone on the national line of $108,352 a year (index 100), the marginal rate is 30% in 2026–27. Sacrificing $10,000 would save $3,000 in income tax, but the contribution is taxed at 15% ($1,500), so you effectively save $1,500. The $8,500 net contribution grows in super, taxed at 15% on earnings.

For higher incomes, the saving is larger. A worker earning $190,000 (marginal rate 45%) would save $4,500 on a $10,000 sacrifice, netting $3,000 after the 15% contributions tax. That's a strong incentive to maximise salary sacrifice up to the annual cap.

How much to sacrifice based on your income

The first step is to know your marginal tax rate. Use the 2026–27 resident rates (excluding Medicare): nil up to $18,200; 15% from $18,201 to $45,000; 30% from $45,001 to $135,000; 37% from $135,001 to $190,000; 45% above $190,000. Add 2% Medicare levy.

If you're in the 15% bracket (earning between $18,201 and $45,000), salary sacrifice offers little advantage because the contributions tax is also 15%. You might still consider it if you want to force savings, but the tax benefit is negligible.

In the 30% bracket (roughly $45,001 to $135,000), salary sacrifice starts to make sense. The saving is 15% of the sacrificed amount (30% minus 15%). For someone on the average earnings of $108,352 (index 100), sacrificing up to the concessional cap could save thousands in tax each year.

In the 37% bracket ($135,001 to $190,000), the saving is 22% (37% minus 15%). And in the top 45% bracket, the saving is 30%. High-income earners often max out their concessional cap to reduce tax.

But there's a catch: salary sacrifice reduces your take-home pay. You need to ensure you can cover your living expenses. Also, the super guarantee (SG) is already 12% of your ordinary-time earnings, so your total super contributions (SG plus salary sacrifice) must stay within the concessional cap. The cap is set by the ATO and is typically around $27,500 per year. If you exceed it, the excess is taxed at your marginal rate.

Tax considerations and the salary index

The salary index measures gross ordinary-time earnings, not after-sacrifice amounts. Your salary sacrifice doesn't change your index figure because the index uses your full-time adult ordinary-time earnings before any sacrifice. However, your taxable income drops, which affects your tax bill.

For example, a worker on the national line ($108,352) who sacrifices $10,000 has a taxable income of $98,352. Their tax (excluding Medicare) would be calculated on that lower amount, saving about $3,000. The sacrificed $10,000 goes into super, taxed at 15% ($1,500), so the net retirement benefit is $8,500 plus future earnings.

If you're in a state with higher average earnings, like ACT (index 109.9, $119,090) or WA (index 106.9, $115,825), you're more likely to be in a higher tax bracket, making salary sacrifice more attractive. Conversely, in Tasmania (index 88.6, $96,008) you might be in the 30% bracket, still beneficial but less so.

Practical examples

Example 1: Average earner Alex earns $108,352 (index 100). Marginal rate 30%. Alex decides to salary sacrifice $10,000 per year. Tax saved: $3,000. Contributions tax: $1,500. Net retirement boost: $8,500. Take-home pay drops by $7,000 ($10,000 minus $3,000 tax saved). Alex's total super contributions (SG 12% = $13,002 plus sacrifice $10,000 = $23,002) are under the cap.

Example 2: High earner Jordan earns $200,000 (index ~184.6). Marginal rate 45%. Jordan sacrifices $27,500 (the cap). Tax saved: $12,375. Contributions tax: $4,125. Net retirement boost: $23,375. Take-home pay drops by $15,125. SG on $200,000 is $24,000 (but capped at $270,830 base, so $24,000). Total contributions $51,500 exceed cap? Actually cap is $27,500 total concessional, so Jordan would exceed unless they reduce SG? No, SG is mandatory; excess contributions are taxed at marginal rate. So Jordan must be careful: if SG is $24,000, they can only sacrifice $3,500 to stay under cap. This highlights the importance of knowing your SG amount.

Example 3: Low earner Sam earns $45,000 (index 41.5). Marginal rate 15%. Sacrificing $1,000 saves $150 in tax but pays $150 contributions tax – no net benefit. Sam might prefer to keep the cash or use after-tax contributions for the government co-contribution (if eligible).

Final thoughts

There's no one-size-fits-all answer to how much you should salary sacrifice. It depends on your income, tax bracket, and financial situation. A good starting point is to contribute enough to take advantage of the tax savings if you're in the 30% bracket or higher, up to the concessional cap. But always check your SG amount to avoid exceeding the cap. For personalised advice, speak to a financial planner or use the pay guides on this site to understand your award and entitlements.

Remember, salary sacrifice locks money away until preservation age, so only sacrifice what you can afford to forgo until retirement. The topics section has more on super and tax strategies.