You've heard the term in the lunchroom or at a barbecue: someone mentions they're "salary sacrificing" into super and paying less tax. It sounds like something for high flyers with accountants, so if you're juggling a mortgage, school costs and a grocery bill that keeps climbing, you may have quietly filed it under "one day". The reality is simpler and more encouraging. Salary sacrifice is one of the most straightforward, entirely legitimate tax concessions available to ordinary Australian workers — and the years between 45 and 60 are exactly when it does its best work.
What salary sacrifice actually is
Salary sacrifice is an arrangement with your employer to give up part of your before-tax salary and have it paid into your superannuation fund instead. Rather than receiving that money as take-home pay — after income tax has come out — it goes into super, where it's taxed at just 15 per cent on the way in.
That's the whole idea. There's no product to buy and no scheme to join: it's just a different route for money you were already earning. The arrangement is set up in writing with your payroll office, and it can only cover pay you haven't yet earned — you can't sacrifice salary retrospectively.
Where the tax saving comes from
The saving is the gap between your marginal tax rate and the 15 per cent contributions tax.
Say you're 52 and earning $100,000 a year. In 2026–27, every extra dollar you earn between $45,000 and $135,000 is taxed at 30 cents, plus the 2 per cent Medicare levy — 32 cents all up. Take an extra $1,000 as salary and you keep $680. Salary sacrifice that same $1,000 and $850 lands in your super account after contributions tax. That's $170 more working for you on every thousand dollars, every single year, before you count the investment earnings that money then generates.
Earn more and the sums improve. Between $135,000 and $190,000 your marginal rate is 37 per cent plus the Medicare levy, so $1,000 sacrificed means $850 in super instead of $610 in your hand — you're $240 ahead per thousand.
Earn less and the sums get thin. Below $45,000 the marginal rate for 2026–27 is just 15 per cent plus the Medicare levy — barely above the contributions tax — so salary sacrifice offers little benefit at that level, and options like the government co-contribution may serve you better.
How much you're allowed to put in
Concessional contributions — your employer's compulsory 12 per cent superannuation guarantee (SG) plus anything you salary sacrifice or claim as a personal tax deduction — are capped. For 2026–27 the cap is $32,500.
On a $100,000 salary, your employer's SG comes to about $12,000, which leaves roughly $20,500 of cap space. Very few people need to use all of it — even $100 a week of sacrificed salary makes a real difference over a decade — but it's worth knowing how much headroom you have.
There's a bonus for people playing catch-up. If your total super balance was under $500,000 on 30 June last year, you can also use unused cap amounts from up to five previous financial years. For someone who took time out of the workforce, worked part-time, or simply never got around to contributing extra, these carry-forward amounts can allow a substantial one-off top-up — handy in a year you receive a bonus, an inheritance or a redundancy payment.
And if you accidentally go over the cap, it isn't a catastrophe: the excess is generally added back to your taxable income and taxed at your marginal rate, which puts you roughly back where you started rather than penalising you.
Setting it up is easier than you think
Ask your payroll or HR team for a salary sacrifice agreement, decide on an amount per pay cycle, and put it in writing before the pay period starts. One important protection: your employer must still calculate your compulsory SG on your full pre-sacrifice salary — sacrificed amounts can't be used to shrink it.
If your employer doesn't offer salary sacrifice, or your income is irregular, there's an equally good route: make a personal contribution from your bank account, lodge a "notice of intent to claim a deduction" with your super fund, and claim the deduction in your tax return. The tax result is essentially the same, and you control the timing.
If you're behind — and what to watch
Plenty of people arrive at 50 with less super than they'd like. The encouraging news is that your 50s are usually the decade when the mortgage is shrinking, the kids are getting cheaper and your income is at its peak — which makes salary sacrifice more affordable now than it has ever been. Combined with the carry-forward rules, a strong final decade of contributions can transform a retirement balance.
A few cautions. Money in super is preserved: as a general rule you can't touch it until at least age 60, so never sacrifice money you'll need for the mortgage or an emergency fund. Watch the cap if you have more than one job or you're contributing to more than one fund — all concessional contributions count together. And very high earners should be aware that an additional contributions tax applies under the Division 293 rules once income passes a threshold, though even then super usually remains tax-effective.
Above all, don't let the jargon put you off. Behind the term "salary sacrifice" is a simple trade: pay less tax now, own more of your future.
If you'd like the full picture — contribution strategies, caps, catch-up rules and what happens when you retire — Noel Whittaker's Super Made Simple (7th Edition) explains it all in the same plain English, updated for the current financial year. Buy direct from the author for $16.95 and you'll get both PDF and EPUB formats.
This article is general information only and doesn't take account of your personal circumstances. Figures are current at time of writing and change each financial year. Consider seeking advice before acting.