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Home Super & retirement Super Growing your super Before tax contributions (salary sacrifice)

Before tax contributions (salary sacrifice)

By adding to super from your before-tax salary, you could reduce your taxable income and reduce your tax bill, while growing your retirement savings. Take a look at the benefits, caps and how to salary sacrifice.

What are before-tax contributions?

Before-tax (concessional) contributions are contributions added to your super account before your income tax has been deducted. These are generally taxed at 15% when added your super account, instead of your marginal income tax rate, which can be as high as 45%.

Salary sacrifice is a type of before-tax contribution. It' s an arrangement between you and your employer to redirect some of your before-tax (gross) salary into your super account instead of your bank account.

This can reduce the tax you pay and give you more money in the long-term. Salary sacrifice helps you pay less tax in two ways:

Pay less income-taxReduce your taxable income
Before-tax salary paid to your super account gets taxed at 15% (unless your combined income and super contributions are more than  $250,000, in which case the tax is 30%). This compares to any salary you take home which will get taxed at your usual marginal tax rate, which can be as high as 45% (plus Medicare levy).You can reduce your taxable income with every dollar salary-sacrificed to super. The more before-tax salary you put into your super, the smaller your taxable income will be – this could mean even more savings at tax time.
Note: If your employer doesn’t offer salary sacrifice, you can make contributions directly and claim them as a tax deduction.

Compare the tax rates  for 2019/20:

Taxable IncomeIncome
tax rate
Salary sacrifice
tax rate
$0 - $18,2000 0%15%
$18,2001 - $37,00019%15%
$37,001 - $90,00032.5%15%
$90,001 - $180,00037%15%
$180,001 - $250,00045%15%
$250,001 +45%30%

These tax rates don't include any medicare levy payable. 

Speaking to your employer

Before salary sacrificing, make sure your employer will continue to calculate your super guarantee (SG) payments on your gross income (i.e. before the salary sacrifice amount is deducted). It’s best to get this agreement in writing. If your employer calculates your SG on your reduced salary, claiming a tax deduction on an after-tax contribution may be a more effective strategy.

Questions to ask your employer:

  • Will your employer allow you to salary sacrifice into super?
  • If you salary sacrifice, how will they calculate your future SG?
  • Are you able to start or stop at any time?
  • Can you change amounts at any time?
  • Does your employer charge an administration cost?
  • Does your employer set any limits to how much you can salary sacrifice?

How to set up salary sacrifice

  If salary sacrifice is right for you simply speak to your employer who can direct some of your pay into your super. 

Contribution caps

There are limits to how much you can add to your super account. The limits are different for before-tax and after-tax contributions. 

Contribution limits

There are limits to how much you can contribute to your super throughout any financial year.

Type of contributionAnnual caps
(from 1 July 2017)
Before tax (concessional)
Includes employer contributions (e.g. Superannuation Guarantee), any amount you salary sacrifice into super and personal contributions that you claim as a tax deduction
$25,000 (all ages)
After tax (non-concessional)
personal contributions for which you do not claim an income tax deduction, and spouse contributions

*If you are under 65 years of age, you may be able to make non-concessional contributions of up to three times the annual cap in a single year. The maximum bring-forward amount is $300,000.

If your total super balance is over $1.6 million, no further non-concessional contributions will be permitted in any year.

Any amounts contributed in excess of the caps will be taxed at your marginal tax rate or higher. The contribution caps and the $1.6 cap apply in total across all of your superannuation accounts.