Salary Sacrifice

Salary sacrifice (often included as part of your salary packaging) occurs when you, as an employee, agree to forgo an amount of your salary pre-tax in return for an equal amount to be contributed to your super by your employer. Salary sacrificing reduces your cash salary and accordingly the amount of income tax assessed on your salary. Employers are able to claim a tax deduction for amounts salary sacrificed on behalf of employees. Amounts salary sacrificed into super are classified as a concessional contribution.

The reduction to your gross salary (salary before tax), is the amount salary sacrificed.

Amounts that are salary sacrificed into a super fund do attract a 15% contributions tax when they are paid into super which is payable to the ATO. As previously discussed, people with income totalling more than $250,000 will pay an additional contributions tax of 15% (called Division 293 tax) on some or all of their concessional contributions. For people on low incomes (under $37,000) the first $500 of this contributions tax will be refunded back into their account via the Low-Income Superannuation Tax Offset.

The amount able to be salary sacrificed into super is limited by the $30,000 (2024/25) contribution cap. Where the total amount of concessional contributions, including  a salary sacrifice, exceeds the annual contribution cap, the excess amount is added back to the assessable income of the member and taxed at their marginal tax rate. However, the member will be entitled to a 15% tax offset to compensate for the fact that a 15% contributions tax was already paid by the member when paying the contribution. If you don't withdraw the excess concessional contribution from your super account, it will also count towards your non-concessional contributions cap.