How Much to Salary Sacrifice into Super: Matching Your Pay to the Tax and Super Rules

Understanding Salary Sacrifice into Super

Salary sacrifice is an arrangement where you ask your employer to pay part of your pre-tax salary directly into your super fund instead of giving it to you as cash. The amount sacrificed counts as a concessional contribution and is taxed at 15% inside super, rather than at your marginal income tax rate. The key question for many Australians is how much to salary sacrifice into super to maximise tax savings without exceeding the annual cap.

From 1 July 2026, the super guarantee is 12% of your ordinary-time earnings, up to a maximum contribution base of $270,830. That means your employer already puts 12% of your salary into super. Any salary sacrifice you add sits on top of that, but the total concessional contributions (employer plus your sacrifice) cannot exceed the annual cap without penalty.

How Much to Sacrifice: The Tax Math

The decision comes down to your marginal tax rate. For the 2026-27 financial year, resident tax rates (excluding Medicare) are:

• 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

Plus a 2% Medicare levy applies to most taxpayers.

If your marginal rate is higher than 15%, salary sacrifice saves you the difference between your marginal rate (plus Medicare) and the 15% contributions tax. For example, someone earning $135,000 (just inside the 30% bracket) pays 30% + 2% = 32% on each extra dollar. Sacrificing $1,000 reduces taxable income by $1,000, saving $320 in tax and Medicare. That $1,000 goes to super and is taxed at 15% ($150), so the net benefit is $170. The higher your bracket, the bigger the saving.

But you also need to consider the concessional cap. For 2026-27, the cap is $30,000. If your employer’s super guarantee already uses part of that cap, you can only salary sacrifice the remainder. For instance, if you earn $100,000, your employer contributes $12,000 (12%). That leaves $18,000 of cap space for salary sacrifice. Sacrificing more than that triggers excess contributions tax, which wipes out the benefit.

Using the Salary Index to Gauge Your Position

The Salary Index measures full-time adult ordinary-time earnings, with 100 set at $108,352 per year (based on ABS Average Weekly Earnings, May 2026). Your own gross pay relative to this index helps you see which tax bracket you sit in and how much cap space you might have.

• If your index is around 100 ($108,352), your marginal rate is 30% (plus Medicare). Your employer’s super guarantee is about $13,002 (12%), leaving roughly $16,998 of cap for salary sacrifice.
• If your index is 125 ($135,440), you’re in the 30% bracket but close to the 37% threshold. Sacrificing enough to drop below $135,000 could save you 7% extra (the difference between 37% and 30%).
• If your index is 175 ($189,616), you’re in the 37% bracket. Sacrificing up to the cap saves you 22% (37% + 2% Medicare – 15% contributions tax).

You can compare your pay to the national line using how the index works. The index also varies by state and industry. For example, the states page shows that the ACT index is 109.9 ($119,090), while Tasmania is 88.6 ($96,008). Workers in high-paying states or industries like mining (index 154.7) often have more room to benefit from salary sacrifice because their marginal rates are higher.

Practical Examples for Different Incomes

Example 1: Retail worker on $60,000 (index 55.4) Marginal rate: 30% (after tax-free threshold). Employer super: $7,200 (12%). Cap remaining: $22,800. Sacrificing $5,000 saves $1,600 in tax and Medicare, costs $750 in contributions tax, net benefit $850. Worthwhile if you can afford the reduced take-home pay.

Example 2: Professional on $120,000 (index 110.8) Marginal rate: 30%. Employer super: $14,400. Cap left: $15,600. Sacrificing the full $15,600 saves $4,992 in tax/Medicare, costs $2,340 in contributions tax, net benefit $2,652. That’s a significant boost to your super.

Example 3: High earner on $200,000 (index 184.6) Marginal rate: 45% + 2% Medicare = 47%. Employer super: $24,000 (12% of $200,000, but note the maximum contribution base is $270,830, so full 12% applies). Cap left: $6,000. Sacrificing $6,000 saves $2,820 in tax/Medicare, costs $900 in contributions tax, net benefit $1,920. Even with limited cap space, the saving is substantial.

Other Factors to Consider

• Your super balance: If you’re close to the transfer balance cap ($1.9 million for 2026-27), additional contributions may not be tax-effective.
• Preservation age: Money sacrificed into super is locked away until you meet a condition of release (usually preservation age, currently 60 for most). Don’t sacrifice more than you can afford to lock up.
• Award or agreement rules: Some modern awards or enterprise agreements allow salary sacrifice, but others may restrict it. Check your pay guides or talk to your employer.
• Low-income earners: If your marginal rate is 15% or lower, salary sacrifice gives no tax advantage. However, the government’s low-income super tax offset (LISTO) refunds the 15% contributions tax on the first $500 of concessional contributions for those earning under $37,000. That effectively makes the contribution tax-free.

Links to More Resources

For a deeper look at how your pay compares to the national average, visit the Salary Index homepage. You can also explore industries to see typical pay levels in your field, or check how the index works to understand the methodology behind the numbers.

Remember, salary sacrifice is one tool in your super planning kit. The right amount depends on your personal circumstances, goals, and the annual cap. Use the index as a starting point to see where your income sits, then calculate how much cap space you have and how much tax you can save. Always consider seeking professional advice tailored to your situation.