What is salary sacrifice?
Salary sacrifice is an arrangement where an employee gives up part of their pre-tax salary in return for benefits, commonly extra super.
Salary sacrifice is an arrangement where an employee agrees to forgo part of their pre-tax salary in exchange for a benefit of similar value, most commonly extra contributions to superannuation. Because the amount comes out of pre-tax income, it can reduce the employee's taxable income.
The arrangement must be agreed in advance and documented. Importantly, salary-sacrificed super contributions count towards the concessional contributions cap, and under current ATO rules an employer cannot use sacrificed amounts to reduce the compulsory super they must pay on the employee's ordinary time earnings.
Key facts
- •Common uses include extra super contributions, cars, and other approved benefits
- •Amounts are taken from pre-tax salary, which can lower taxable income
- •Must be agreed and documented before the income is earned
- •Salary-sacrificed super counts towards the concessional contributions cap set by the ATO
- •Employers cannot count sacrificed amounts towards their compulsory super guarantee obligation
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Take-Home Pay CalculatorFrequently asked questions
Does salary sacrificing into super reduce my employer's compulsory super?
No. Under current ATO rules, your employer must still pay the full super guarantee on your ordinary time earnings, and salary-sacrificed amounts are on top of that.
Is there a limit on how much I can salary sacrifice into super?
Salary-sacrificed contributions count towards the concessional (before-tax) contributions cap. Exceeding the cap can mean extra tax, so check the current cap with the ATO before setting up an arrangement.
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General information and estimates only — not legal, financial or tax advice. Always check your specific award, agreement or contract, or a qualified professional, before you rely on the result.