Explained: the power of the salary sacrifice

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If you earn more than $37,000 and are looking for a way to minimise the tax you pay, salary sacrificing a portion of your wages into superannuation could be the way to go.

After striking an agreement with your employer, you can opt to have some of your pre-tax earnings sent to your super fund, where they will be taxed at just 15 per cent.

Salary sacrificing into super is also a great way to boost your fund’s savings. There are limits, however, on how much you can contribute, plus, the amounts you choose to allocate to salary sacrificing will not be accessible until you reach your preservation age.

The Government’s MoneySmart website has a tool that helps to calculate and optimise your contributions to super.

Ideally, your employer will still send the Super Guarantee amount of 9.5 per cent of your wages to the fund, without using your sacrificed amount to meet their obligation.

It is legal for an employer to use your salary sacrifice to make up the 9.5 per cent contribution, so if you don’t want this to happen, make sure you get your new arrangement in writing.

If your employer is reducing the amount of Super Guarantee it forwards to your fund by using your sacrificed amount to achieve its obligation, there probably is no benefit in it for you.

MoneySmart also warns: “Before you sacrifice some of your salary to super, make sure your employer will continue to calculate your Super Guarantee payments on your gross income, before salary sacrifice. It is best to get this agreement in writing.

“When you salary sacrifice, your employer is entitled to calculate super contributions on your reduced salary; however, many employers will still calculate super contributions on your original gross salary.”

Dig out your superannuation statements and check you are having the contributions you are entitled to be forwarded to your fund at least once every three months.

You can also work out whether you are receiving the correct amount of super by logging into your online super account, contacting your super fund or logging into your myGov account.

If after talking to your employer, you still believe that the right amount of contributions is not being paid into your super, you can report the issue to the Australian Taxation Office.

Can you afford salary sacrificing any pre-tax earnings into your superannuation fund? If you have already been doing this, did you find it beneficial? Have you caught your employer not making the super contributions you were entitled to? And if so, what was the outcome?

How does your Super affect your Age Pension entitlements?

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

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Written by Olga Galacho


Total Comments: 17
  1. 0

    Salary sacrifice does not work if you are on a centrelink payment as they still make you report your gross income.

  2. 0

    What, and do without the high life?????

  3. 0

    All well and good for those who can afford to salary sacrifice….

    I’m beginning to think the YLC people are all massively overpaid – nothing new in this day and age…

    What do those at or near the bottom of the feeding chain do for salary sacrifice? I think there are far bigger issues at play here and today than a few fatter cats getting it better…. we’d all do better as a nation and in this economy if everyone had a fair shake and had discretionary income to spend and thus generate real profits etc.

    • 0

      … or buy shares and/or put it away for their future retirement…

      What does the kid at Macca’s do on part time casual? Or those ‘contracted employees’ these days who don’t have compulsory super paid on their behalf as part of their income as agreed?

      Many an issue needs rectification… not just more for those with enough to salt it away.

    • 0

      Yes TREBOR the whole work environment has changed for the worse. People don’t know that they have been set up to fail and unless one can put a little money away each week retirement is going to be survival at best and destitution at worst. There’s a whole generation heading down that track and the rich in our society who have engineered this slavery population better be careful as the pendulum swinging back the other way may savage them with no Coalition government to run to for protection.
      We all need to remember the French Revolution. The above is working towards a repeat of that event.

    • 0

      Kid’s at Macca are just that – kids working for some spare cash
      Have you ever seen a 40 year old “kid” serving at Macca’s ???


    • 0

      Not sure what kids do these days TREBOR but Warren Buffett started out delivering the newspapers as a boy and used all his income to buy shares and ended up owning the newspaper.

      His biography and autobiography are really interesting.

      The very odd kid working at Maccas is buying shares or cryptos when they can. Not everyone is a spendaholic. I’ve a granddaughter who only buys what she absolutely needs and has quite a saving account for a 13 year old. Who knows when she finally gets that first legal job how much she’ll save.

    • 0

      You’re dreaming again, diablo – many older people work at Macca’s. Your attempt to limit the discussion to those kids at school etc who want a little pocket money, and thus reduce the actual content of the issue, is out of order.

    • 0

      All well and good for kids living at home Rae… and in a good spot at home – many are not.

    • 0

      No TREBOR many have very difficult and tragic beginnings. We used to take these kids away and even that turned into a problem. Giving them charity isn’t a fix either. It just grows dependence. I suppose some will overcome adversity.

      What’s the solution to poor homes and parenting?

    • 0

      Actually olbaid, not sure where you’ve been but older people do work at Maccas. I have seen quite a few mature aged “kids” working there.

  4. 0

    All well and good if you trust super accounts into the future. It all might be my money but at a whim by the Govt I could be prohibited from accessing it. Yes, I could take mine out at 60 tax free but that will not last. So one day it could be announced that you could only take it out at retirement of 67 and only as an allocated pension. That would stuff up your OAP and the card which entitles you to council rates or rent assistance.
    The younger folk are not that stupid – they have listened to the baby boomers and their pension problems

    • 0

      Superannuation WILL one day be nationalised. That means stolen and rolled into Consolidated Revenue. It’s not the first time a government has done this.
      Young folk are not like us when we grew up. They are being set up to fail with casual work when they could be offered permanent fulltime work and wages/conditions regularly under attack. Of course we CAN give the top end of town tax cuts. Funny that.
      Sadly young people will save nothing and get to the end of the road and be destitute. That’s the reality at the end of a working life. It’s disgraceful.

    • 0

      Superannuation will be destroyed by labor if Shorten gets in

  5. 0

    If your employer is matching you 1 for 1 then by all means its a great way to save . 130% returns straight away
    And in one of those do nothing public service jobs your returns are more like 250%

    If you live to 60 – you get to cash out, or leave it to your spouse or kids

  6. 0

    Rubbish. Anything you salary sacrifice is added on top of you salary – so if you’re earning the $37,000 mentioned and decide to sacrifice say $7000 into your super or anything else for that matter, for tax purposes you are deemed to have earnt $44,000. When you come time to retire you could end up owing the taxman money. Plus it means your employer doesn’t actually have to pay your full 9% super into your fund. Because, hey stupid you are paying part of that for them.

    Was caught out when I retired after years of salary sacrificing into my super fund. Received letter saying because I had earned some ridiculous amount the year before and not worked the full tax year I now owed the tax office money. On phoning to dispute the amount they said had been earnt, a very nice taxman explained how salary sacrificing actually worked.

    The only people who benefit from it are the employers as they don’t have to pay so much tax or so much superannuation into your fund.

    • 0


      you sound as confused as Trebore

      the 2 of you should get together to discuss imputation credits and super. If you made a Youtube video, you guys would be famous !!!



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