Salary sacrificing into super explained

You may have heard of ‘salary sacrifice’, but do you know how it could benefit your super?

This simple guide explains how salary sacrifice works, what to consider, and why it could help you save on tax and grow your retirement savings.

What is salary sacrifice?

Salary sacrifice is when you arrange with your employer to give up (‘sacrifice’) some of your before-tax salary to pay for a benefit such as a car, health insurance or other personal expense.

The benefits available depend on your employer, but most offer salary sacrificing into super. This means your employer pays part of your before-tax salary into your super account, along with their compulsory contributions.

What are the benefits of salary sacrificing?

• You could pay less income tax
  Salary sacrifice contributions reduce your taxable income, which means you could pay less income tax. Take Amanda and Ross as an example. They both earn an annual salary of $70,000, but Amanda salary sacrifices $5,200 a year ($100 a week) to her GESB Super account. This reduces her taxable income to $64,800, which means she may pay less tax than Ross, even though they earn the same salary.¹
• There may be more tax benefits
  In taxed super funds, such as GESB Super, salary sacrifice contributions and any returns they generate are generally taxed at a concessional rate of 15%. This may be lower than your income tax rate, which means your total benefit (take-home pay and super combined) could increase through salary sacrificing, depending on your personal circumstances. See our Salary sacrifice page for examples of how the tax benefits work with your account.
• Salary sacrifice is flexible
  You can start, stop or change your contribution amount as your situation changes.
• Even small contributions can grow over time
  While salary sacrificing may slightly reduce your take-home pay, it can make a big difference to your super over time. Your contributions can earn investment returns, and those returns can also earn returns, helping your balance grow while it stays invested.

What to consider before salary sacrificing?

There are a few things to consider before deciding if salary sacrificing into super is right for you:

• Super is designed for retirement
  Once you add money to your super, you generally can’t access it until you retire.
• The tax benefits depend on how much you earn
  If you are likely to earn below the tax-free threshold of $18,200, salary sacrificing may not be the best option for you.
• There are limits on how much you can contribute
  Salary sacrifice and compulsory employer contributions are types of concessional (before-tax) contributions. Because super receives tax benefits that can reduce the amount of tax you pay, there are limits on how much you and your employer can contribute. These are known as contribution caps. If you exceed your caps for a financial year, you may have to pay more tax.

Salary sacrifice rules can also be different depending on your income and the type of super account you have. Visit our Salary sacrifice page for other important things to know.

How to set up salary sacrificing

Step 1: work out how much you’d like to contribute

Use our contributions calculator to understand the impact of salary sacrificing on your take-home pay and your final super balance.

By entering how much you are willing to salary sacrifice, this calculator will estimate the most effective way for you to make contributions - before or after tax.

Step 2: create an arrangement with your employer

Talk to your employer's payroll team to confirm they offer salary sacrificing. If they do, you can complete our online Payroll deduction form or download and print the PDF version and give it to your employer.

Step 3: check your contributions

Log in to Member Online to keep track of your payments. Member Online has a concessional contributions cap tracker to help make sure you don’t exceed your limit.

Other ways to top up your super

If salary sacrifice doesn’t suit you right now, there are other options to grow your super, such as:

• Personal after-tax contributions – contributions from your take-home salary, or from lump-sum amounts such as inheritance or money from selling an asset
• Spouse contributions – contributions to help grow your spouse’s super and your joint retirement savings, especially if they’re on a low income or not working
• The Super Co-contribution – a co-contribution from the Australian Government to match some of your personal after-tax contributions, if you’re eligible

Learn more about different ways you can add to your super.