Salary sacrifice

You can make a difference to your super and cut your tax at the same time. Here’s how it works.

You can nominate a certain amount of your pre-tax salary to go straight into your super. This is called salary sacrificing.

Your reduced salary (that is, your salary minus the amount you salary sacrifice to super) becomes your assessable income for tax purposes.

For example, say you earn $70,000 and contribute $3,500 of your salary to super using salary sacrifice. At tax time, you’ll only be taxed on $66,500 ($70,000 less $3,500).

If you earn more than $58,980, salary sacrifice may help you qualify for the government’s Super Co-contribution. For example, if you earn $60,000, you may choose to salary sacrifice $5,000 in order to access a co-contribution of up to $150.

Important points about salary sacrificing

  • You are most likely to benefit from salary sacrificing if you are on a higher marginal tax rate.
  • The amount you salary sacrifice is not subject to pay as you go (PAYG) withholding tax and will not appear on your payment summary.
  • Your salary sacrifice contribution will be taxed at 15% when it’s received by your super fund. (From 1 July 2007, employer contributions, including salary sacrifice, of more than $50,000, or $100,000 if you’re aged over 50, will be taxed at 46.5%.)

Getting started

Check whether your employer allows salary sacrifice arrangements. If they do, you’ll need to consider:

  • how much you want to contribute from your salary – usually you can nominate the amount as either a percentage or fixed dollar amount
  • whether you want to sacrifice any of your bonus, if you receive one, to super.



To make a difference to your super, contact a financial planner accredited by AMP.
AMP # 1 for super is based on assets under management (Plan for Life March 07 and DEXX&R March 2007). Find out more about why AMP for super.


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