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Is it worth salary sacrificing into super? 

November 20, 2023 | 6 min read 

Summary: While salary sacrificing into super isn't the right choice for everyone, it can be a powerful tool in building a more secure and comfortable retirement. Start by understanding your financial goals, exploring the current contribution caps, and consulting with a financial expert to determine if this strategy is worth pursuing for you.


Key takeaways

  • Salary sacrificing into super involves redirecting a portion of your pre-tax salary into your super fund
  • One of the primary advantages of salary sacrificing into super is the potential for significant tax savings
  • The annual limit on the amount you can salary sacrifice into super without incurring additional tax in Australia in this financial year (2023/24) is $27,500. You may be eligible for a higher limit if your total superannuation balance last 30 June was less than $500,000.

We're all familiar with the concept of super. It's that portion of our salary that employers are required to contribute to a super fund on our behalf, with the goal of providing us with financial security in retirement.

But what not everyone is aware of is that relying solely on your employer's contributions might not be enough to ensure a comfortable retirement. That's where salary sacrificing into super comes into play.

Here, we'll explore the ins and outs of salary sacrificing into your super and help you determine if it's worth considering as part of your financial strategy.

What is salary sacrificing into super?

Salary sacrificing into super involves redirecting a portion of your pre-tax salary into your super fund. Instead of receiving this portion as part of your take-home pay, it goes straight into your super account.

Here's how it works:

  • Agreement - You and your employer agree to salary sacrifice a specific amount or percentage of your pre-tax salary into your super fund. This amount is in addition to the compulsory employer contributions.
  • Pre-tax - The sacrificed amount is deducted from your gross (pre-tax) salary, reducing your taxable income. This means you pay less income tax on your take-home pay.
  • Super contributions - The sacrificed amount is added to your superannuation contributions, helping you build a more substantial retirement nest egg.


The benefits of salary sacrificing into super

Now that we’ve covered the basics of salary sacrificing, let's explore the benefits of this strategy:

  • Tax savings - One of the primary advantages of salary sacrificing into super is the potential for significant tax savings. The sacrificed amount is taxed at the concessional super tax rate of 15%, which is typically lower than the tax rate you pay on your income. This means you get to keep more of your money while still saving for retirement. You may pay additional 15% tax if your income exceeds $250,000. In this case, the effective tax on your contributions will be 30%, which is still less than the highest tax rate of 47%.
  • Faster retirement savings growth - By contributing more to your super fund through salary sacrificing, you're accelerating the growth of your retirement savings. Your money is invested over an extended period, potentially leading to more substantial gains through compound investment returns. Compound investment returns refer to earning money not just on the original investment but also on the accumulated interest gained over the period since the investment was made.
  • Lower taxable income - Since the sacrificed amount is deducted from your pre-tax salary, your taxable income is reduced. This can have several additional benefits, such as qualifying you for certain concessions, reducing the Medicare Levy, and helping you stay in a lower tax bracket (salary sacrifice contributions are not subject to the Medicare Levy or the Medicare Levy Surcharge. This can lead to significant tax savings, especially for higher-income earners.)
  • Automatic savings - Salary sacrificing is an automated process. The money is taken out of your pay before you even see it, which can help you build disciplined savings habits.
  • Long-term financial security - Salary sacrificing into super is a smart way to attain long-term financial security during your retirement years. It provides peace of mind, knowing that you're taking proactive steps to build a comfortable retirement nest egg.


Things to consider before salary sacrificing into super

While salary sacrificing into super offers numerous advantages, it's essential to consider some factors before taking the plunge:

  • Contribution caps - The annual limit on the amount you can salary sacrifice into super without incurring additional tax in Australia in this financial year (2023/24) is $27,500. The cap limits change over time so it’s important to be aware of the current contribution cap limit. You may be eligible for a higher limit if your total superannuation balance last 30 June was less than $500,000.
  • Your financial goals - Consider your overall financial goals when deciding how much to salary sacrifice into super. You should strike a balance between your short-term and long-term financial needs. If you have pressing financial commitments, it might not be wise to sacrifice too much of your current income. What kind of lifestyle do you envision for your retirement? The more comfortable you want it to be, the more you may need to save.
  • Reduced take-home pay - Salary sacrificing means you'll have less money in your take-home pay. This can be challenging if you're on a tight budget or have immediate financial needs.
  • Investment risk - Your salary sacrifice contributions are invested, and like any investment, they come with inherent risks. Depending on market performance, your super balance can fluctuate.
  • Access to funds - Remember that once your money is in your super fund, you generally can't access it until retirement, or you meet certain conditions. Ensure you have enough liquid assets outside of super, such as cash or shares, to cover emergencies or short-term financial needs. Super is designed for retirement savings, so accessing your money before you reach preservation age can be challenging. Preservation age varies from 55 to 60, depending on when you were born. If you were born on or after 1 July 1964 your preservation age will be 60.
  • Seeking advice - It's a good idea to consult with a financial adviser or accountant before implementing a salary sacrifice strategy. They can help you assess your unique financial situation and provide personalised recommendations.

Is it worth salary sacrificing into super?

Now that we've examined the pros and cons of salary sacrificing into super, the question remains: is it worth it for you?

The answer depends on your individual financial circumstances and goals. Do you have outstanding debts or immediate financial needs that should take priority over extra super contributions? It's crucial to have a solid financial foundation before diverting funds into super.

For many Australians, especially those who can afford to do so, salary sacrificing into super can be a highly effective way to boost retirement savings, enjoy tax benefits, and secure long-term financial stability.

Higher-income earners tend to benefit more from salary sacrificing due to the potential for substantial tax savings, but the benefits are not exclusive to that income bracket.

It is sensible to strike a balance that suits your overall financial plan and to stay informed about any changes in legislation or contribution caps. As your financial circumstances are unique to you, consider seeking professional advice to help you make the best decision for your future.


*Based on KPMG Super Insights 2023 Report as at May 2023 KPMG Super Insights 2023 Report

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  • This article has been prepared by NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as trustee of the MLC Super Fund ABN 70 732 426 024. NULIS is part of the Insignia Financial group of companies comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (‘Insignia Financial Group’). The information in this article is current as at November 2023 and may be subject to change. This information may constitute general advice. The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider obtaining independent advice before making any financial decisions based on this information. It is recommended that you consider the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you make any decisions about your superannuation. You can obtain the latest copy of the PDS (or other disclosure documents) and TMD by calling us on 132 652 or by searching for the applicable product at You should not rely on this article to determine your personal tax obligations. Please consult a registered tax agent for this purpose. Opinions constitute our judgement at the time of issue. The case study examples (if any) provided in this article have been included for illustrative purposes only and should not be relied upon for decision making. Subject to terms implied by law and which cannot be excluded, neither NULIS nor any member of the Insignia Financial Group accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in the information in this communication.