What Is Salary Sacrifice Super? A Plain Explanation

What Is Salary Sacrifice Super?

Salary sacrifice super is a way to boost your retirement savings by asking your employer to put some of your pre-tax salary directly into your superannuation fund, instead of paying it to you as cash. This reduces your taxable income, so you pay less income tax. The money then grows in super, where it is taxed at a lower rate (usually 15%) until you retire.

It is different from the compulsory super guarantee (12% from 1 July 2026), which your employer must pay on top of your salary. Salary sacrifice is voluntary and comes out of your agreed gross pay.

How the Salary Index Relates to Salary Sacrifice

The Salary Index measures full-time adult ordinary-time earnings, with 100 equal to $108,352 per year (based on ABS Average Weekly Earnings, May 2026). This figure is your gross pay before any salary sacrifice arrangement. So if you earn $108,352 and sacrifice $10,000, your index is still 100 – the index does not change because it uses your ordinary-time earnings, not your assessable income. The sacrifice simply redirects part of that gross pay to super.

State Differences and Salary Sacrifice

Average pay varies across states, which affects how valuable salary sacrifice can be. Workers in states with higher average earnings are more likely to be in higher tax brackets, so the tax saving per dollar sacrificed is larger.

• ACT has the highest index at 109.9 (annualised $119,090). A typical worker here may have a marginal tax rate of 30% or 37% (plus 2% Medicare), making salary sacrifice very tax-effective.
• WA index is 106.9 ($115,825), also high. Many workers in WA’s mining industry (index 154.7) earn well above the national average, so they benefit even more.
• Tasmania has the lowest index at 88.6 ($96,008). Workers here are more likely to be in the 15% or 30% tax brackets, so the benefit is smaller.
• NSW (101.2), VIC (98.0), QLD (97.9), SA (94.6), and NT (95.2) fall in between.

You can explore state pay levels on our states page.

Industry Differences and Salary Sacrifice

Industry matters even more. Some industries pay well above the national average, making salary sacrifice more attractive for workers in those fields.

• Mining (index 154.7) – average earnings around $167,600. A miner on this pay is in the 37% tax bracket (plus Medicare 2% = 39%). Sacrificing $10,000 saves $3,900 in tax, and after the 15% super tax ($1,500), the net benefit is $2,400.
• Professional, scientific and technical services (index 114.7) – average $124,300. Marginal rate likely 30% or 37%, so solid benefit.
• Education and training (index 105.5) – average $114,300. Similar benefit.
• Health care and social assistance (index 97.8) – average $106,000. Still above the national average, but the benefit is moderate.
• Retail trade (index 75.9) – average $82,200. Marginal rate 30% (plus Medicare), so saving $3,200 on a $10,000 sacrifice, net benefit $1,700.
• Accommodation and food services (index 72.5) – average $78,600. Similar to retail.

See our industries page for more detail.

Tax and Super Rules

From 1 July 2026, the super guarantee is 12% of your ordinary-time earnings, up to a maximum contribution base of $270,830. Salary sacrifice contributions are on top of this, but they count towards the concessional contributions cap (currently $30,000 per year). If you exceed the cap, the excess is taxed at your marginal rate.

Resident tax rates for 2026–27 (excluding Medicare) are:

• $0–$18,200: nil
• $18,201–$45,000: 15%
• $45,001–$135,000: 30%
• $135,001–$190,000: 37%
• $190,001+: 45%

Plus a 2% Medicare levy. So the effective marginal rates are 17%, 32%, 39%, and 47%.

Example: Salary Sacrifice for an Average Earner

Imagine you earn the national average of $108,352 (index 100). Your marginal tax rate is 30% + 2% Medicare = 32%. You decide to salary sacrifice $10,000.

• Your taxable income drops to $98,352.
• You save $3,200 in tax (32% of $10,000).
• Your take-home pay falls by $6,800 ($10,000 – $3,200).
• The $10,000 goes into super and is taxed at 15% ($1,500), leaving $8,500 invested.
• Net benefit: $3,200 tax saved minus $1,500 super tax = $1,700.

If you instead earned the retail industry average ($82,200, index 75.9), your marginal rate is still 32% (assuming you are in the 30% bracket), so the percentage saving is the same, but the dollar amount is smaller if you sacrifice the same $10,000.

Is Salary Sacrifice Right for Everyone?

Salary sacrifice super is most beneficial for people on higher incomes who can afford to reduce their take-home pay and who are in a high tax bracket. For low-income earners, the tax saving is minimal, and you might be better off using the government’s super co-contribution or simply keeping the cash. The national minimum wage earner ($52,255, index 48.2) has a marginal rate of only 17%, so sacrificing $1,000 saves just $170 in tax, and after the 15% super tax ($150), the net benefit is only $20.

Also, salary sacrifice reduces your assessable income, which could affect eligibility for some benefits or tax offsets. It is always a good idea to check with a financial adviser or use the pay guides on our site to understand your specific situation.

Summary

• Salary sacrifice super means redirecting pre-tax pay into super, reducing your taxable income.
• The salary index stays the same because it measures gross ordinary-time earnings before sacrifice.
• The benefit is larger in high-paying states (ACT, WA) and industries (mining, professional services).
• The benefit is smaller in low-paying states (Tasmania) and industries (retail, hospitality).
• Always consider your marginal tax rate, the super cap, and your long-term goals.

For more on how the index works, visit how the index works. For a broader look at pay topics, see our topics page.