Salary Sacrificing – not such a sacrifice

A global survey of people’s attitudes to retirement savings shows while Australians expect to spend, on average, 23 years in retirement, their money will run out after only just 10 years¹ . This gap in retirement savings, affectionately called ‘the retirement gap’ is a growing concern and more and more Australians are looking for ways to boost their super savings.

The good news is that there are easy ways to boost your super
Salary sacrificing is the choice you can make to re-direct some of your salary and make increased contributions into super. This is known as salary sacrifice and is taxed at only 15% (or 30% for high income earners) – that is, for most people, much lower than their marginal tax rate.

Salary sacrificing, particularly for those who have spare cash flow, can be particularly effective as shown in the table below:

Taken as
Salary sacrificed
into super
Gross contribution $1,000 $1,000
Tax rate* (%) 34.5 15
Tax payable $345 $150
Net benefit $655 $850
*includes Medicare Levy


For employees with a marginal tax rate of 34.5 per cent (including Medicare levy), they are $195 better off for every $1,000 they choose to salary sacrifice. Depending on their salary this benefit can be even greater, however it’s important to remember that salary sacrificing doesn’t make sense in every situation.

Taxable income
+ benefits
tax rate* (%)
Contributions tax rate (%) Net tax saving
on contribution (%)
$0 to $18,200 0 15 Negative
$18,201, to $37,000 21 15 6
$37,001 to $90,000 34.5 15 19.5
$90,001 to $180,000 39 15 24
Over $180,000 47 15 32
*Includes Medicare Levy

Important:  concessional contributions are capped at $25,000 (in the 2018/19 financial year) which include the employer SG contribution and salary sacrifice contributions. Additional tax may apply to concessional contributions above this limit.


Government co-contribution
For employees earning less than $52,697 (in the 2018/2019 financial year) the Government co-contribution is another way to boost super balances.

For after-tax contributions of $1,000 or more into super, the Government will make a co-contribution of up to $500. The $500 maximum applies for employees earning less than $37,697 and reduces by 3.333 cents for every dollar of income over $37,697, before phasing out completely once they earn $52,697.


¹Sydney Morning Herald-Australia’s retirement gap among the world’s largest-January 2015

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