The maximum you can put into super at concessional tax rates in 2026-27 is $32,500, and that cap includes your employer’s contributions, so the amount available for salary sacrifice is $32,500 minus whatever your employer pays in. The cap rose from $30,000 on 1 July 2026 (source: ATO, current as at August 2026), which means most people have an extra $2,500 of tax-effective contribution room this year that their old arrangement is not using.
Salary sacrifice is one of the most effective tax strategies available to Australian workers, and we generally find people either don’t use it at all or set an amount years ago and never revisit it. This guide covers the 2026-27 limit, the tax saving at each income level, catch-up contributions, and how to set it up.
What is salary sacrifice super?
Salary sacrifice into superannuation (also called salary packaging) is an arrangement where you agree with your employer to redirect part of your pre-tax salary directly into your super fund. That money never hits your bank account. It goes straight to super, where it is taxed at 15%.
The same dollar taken as salary would be taxed at your marginal rate plus the 2% Medicare levy, which for most working Australians is 32%, 39% or 47% all-in under the 2026-27 brackets. The gap between that rate and 15% is the tax saving.
Salary sacrifice contributions are classified as employer contributions by the ATO, which means they are not subject to fringe benefits tax, and your employer must still pay the full 12% Superannuation Guarantee on your ordinary time earnings as if there were no arrangement in place (source: ATO, salary sacrificing super).
How much can you salary sacrifice into super in 2026-27?
All before-tax (concessional) super contributions count toward one combined annual cap. For 2026-27, that cap is $32,500 per person, up from $30,000 in 2025-26.
The cap includes:
- Your employer’s SG contributions (12% of ordinary time earnings)
- Any salary sacrifice amounts
- Any personal contributions you claim as a tax deduction
To find your available salary sacrifice room, subtract your employer’s annual SG from $32,500:
| Gross salary | Employer SG (12%) | Salary sacrifice room (2026-27) |
|---|---|---|
| $70,000 | $8,400 | $24,100 |
| $100,000 | $12,000 | $20,500 |
| $130,000 | $15,600 | $16,900 |
| $160,000 | $19,200 | $13,300 |
Two cap mechanics worth knowing. First, exceeding the cap is not a disaster but it kills the advantage: the excess is added to your assessable income and taxed at your marginal rate, less a 15% offset for the contributions tax already paid. Second, the mid-year job change trap: two employers paying SG in the same year, stacked on an existing salary sacrifice arrangement, is the most common way people accidentally blow through the cap. The running total in your myGov ATO account is the safeguard.
One more consequence of the cap rising: anyone who set their salary sacrifice amount to exactly fill the old $30,000 cap now has $2,500 of unused space this year. Reviewing the amount at the start of each financial year is the habit that captures indexation automatically.
How much tax does salary sacrifice save?
The saving per dollar is your all-in marginal rate minus the 15% contributions tax. Under the 2026-27 brackets (source: ATO, individual income tax rates, current as at August 2026):
| Taxable income | Marginal rate (incl. 2% Medicare) | Tax saved per $10,000 sacrificed |
|---|---|---|
| $18,201 to $45,000 | 17% | ~$200 |
| $45,001 to $135,000 | 32% | ~$1,700 |
| $135,001 to $190,000 | 39% | ~$2,400 |
| $190,001+ | 47% | ~$3,200 |
The honest note at the bottom of that table: for income taxed at the 15% bracket (up to $45,000), the saving is only the Medicare levy margin, roughly 2 cents per dollar. At that income level, salary sacrifice is rarely worth the complexity, and the government co-contribution on after-tax contributions is usually the better lever. The strategy earns its keep from the 30% bracket up.
A worked example.
Someone earning $100,000 has an employer SG contribution of $12,000, leaving $20,500 of cap space. If they salary sacrifice the lot:
- Taxable income drops from $100,000 to $79,500
- Personal income tax saved: about $6,560 (at 32% including Medicare)
- Contributions tax paid inside super: $3,075 (15% of $20,500)
- Net tax saving: about $3,485 a year, with $17,425 landing in super
Please note: All figures, scenarios and examples in this article are approximate and for illustrative purposes only. Individual outcomes depend on personal circumstances, income, deductions and current tax law. This is general information, not personal advice.
That $3,485 compounds twice: it is saved every year the arrangement runs, and the contributions themselves grow in a concessionally taxed environment. Repeated over the final ten to fifteen working years, this single arrangement routinely adds six figures to a retirement balance.
You don’t need an employer to do this: personal deductible contributions
Salary sacrifice is an employer arrangement, so it is not available to everyone. Self-employed people, contractors, freelancers and anyone whose employer does not offer it can achieve the same tax result through personal concessional contributions:
- Contribute to your super fund from your bank account
- Lodge a Notice of Intent to Claim a Tax Deduction with your fund before lodging your tax return
- The fund taxes the contribution at 15% as a concessional contribution
- You claim the deduction on your return, reducing taxable income the same way salary sacrifice would
The tax outcome is identical; the difference is timing. Salary sacrifice reduces tax every pay cycle, while a personal deductible contribution reduces tax at return time. The Notice of Intent step is where people slip up, so it is worth confirming the process with your accountant (source: ATO, personal super contributions).
Catch-up contributions: the five year lookback
If your total super balance was below $500,000 at 30 June of the previous financial year, you can carry forward unused concessional cap space from the previous five years and use it on top of the standard $32,500 cap.
The rolling deadline matters: unused space from the 2021-22 year (when the cap was $27,500) expires permanently on 30 June 2027. Someone who received only employer SG that year could have $15,000 or more of that single year’s space still available, on top of later years. Checking takes two minutes: myGov, ATO Online Services, Super, Information, then “Carry forward concessional contributions”.
The numbers get serious when catch-up space meets a one-off income event. Phil and Dan walked through a real case in Episode 10 of the podcast: a couple selling an investment property near retirement faced $98,000 in CGT selling in their last working year. Shifting the sale to the first retirement year cut it to $73,000, and using catch-up concessional contributions on top brought the bill down to $11,000. Scott and Phil also covered the strategy more broadly in Episode 7, “The Superannuation Tax Strategy Most Australians Underuse”, which is worth 20 minutes for anyone with a few quiet contribution years behind them.
Why this strategy matters more for women
We covered the super gender gap in Episode 17 of the podcast, and the numbers are stark: the average woman retires around two years earlier than the average man and lives four years longer, funding a longer retirement from a typically smaller balance.
Catch-up contributions are one of the most direct tools for closing that gap. A woman returning to full-time work after years part-time or out of the workforce often has substantial unused cap space sitting in her ATO record, and combining that space with an ongoing salary sacrifice arrangement in the higher-earning years can move the balance meaningfully. Checking the carry-forward balance in myGov takes less than five minutes.
Division 293 tax: what high earners need to know
If your income plus concessional contributions exceeds $250,000 in a financial year (a threshold unchanged for 2026-27), an additional 15% tax applies to the contributions above the line, taking the effective rate on those amounts from 15% to 30%.
Even at 30%, the arithmetic still favours salary sacrifice for someone on a 47% marginal rate: the saving shrinks from 32 cents to 17 cents per dollar but remains real. Division 293 is assessed after your return is lodged, and it can be paid personally or released from super. For anyone near the threshold, it is worth checking whether extra contributions tip you over before setting the amount (source: ATO, Division 293 tax).
How to set up salary sacrifice super
Step 1: Check your employer offers it. Most do, but it is not compulsory. If yours does not, the personal deductible contribution route above delivers the same result.
Step 2: Calculate your cap space. $32,500 minus your annual employer SG, plus any carry-forward amounts showing in myGov.
Step 3: Agree the amount in writing, in advance. Salary sacrifice must be documented before the relevant salary is earned. It cannot be arranged retrospectively for income already paid. A fixed amount per pay or a percentage both work; reviewing it each 1 July captures cap indexation.
Step 4: Confirm your TFN is with your super fund. Without it, contributions are taxed at 47%, which defeats the entire exercise.
Step 5: Monitor the running total. Since 1 July 2026, Payday Super requires employers to pay super every pay cycle rather than quarterly, so your myGov contributions total is now close to real time. That makes cap tracking genuinely easier, especially after a job change or a bonus that lifts SG unexpectedly.
Salary sacrifice vs after-tax contributions
The two tools do different jobs. Salary sacrifice is a tax reduction tool operating inside the $32,500 concessional cap. Non-concessional contributions use money already taxed, have their own cap of $130,000 for 2026-27 (with a bring-forward of up to $390,000 for eligible people), and are the right vehicle for lump sums: property sale proceeds (see the downsizer contribution rules), inheritances, redundancy payments.
Most Australians approaching retirement end up using both: filling the concessional cap each year for the tax saving, then adding non-concessional amounts when larger sums are available. Our superannuation page covers how the pieces fit together.
The long-term impact on your retirement balance
The immediate saving is real, but the compounding inside super is where the bigger numbers come from. Every dollar of tax saved and invested earns returns in a concessionally taxed environment, and in pension phase those earnings become tax-free.
The years between 50 and 65 are the highest-impact window: income is often at its peak, cap space is available (and often carry-forward space too), and there is still enough runway for compounding to work. To see how your own numbers track, the free Wealthlab super calculator gives a snapshot in a couple of minutes.
Frequently asked questions
What is the maximum salary sacrifice for 2026-27?
The concessional contributions cap is $32,500 for 2026-27, and it includes employer SG contributions. So the maximum salary sacrifice is $32,500 minus your employer’s annual contributions. Someone on $100,000 with $12,000 of employer SG can sacrifice up to $20,500. Eligible people with carry-forward amounts from previous years can contribute more.
How much can I salary sacrifice into super?
Subtract your employer’s annual SG (12% of ordinary time earnings) from $32,500. Check myGov for carry-forward amounts, which can add unused cap space from up to five previous years if your total super balance was under $500,000 at the last 30 June.
Does my employer still have to pay 12% super if I salary sacrifice?
Yes. The full 12% SG must be paid on your ordinary time earnings as if there were no arrangement in place. Salary sacrifice is on top of, not instead of, your SG entitlement.
What happens if I exceed the concessional cap?
The excess is added to your assessable income and taxed at your marginal rate with a 15% offset for the contributions tax already paid. You don’t lose the money, but you lose the advantage, and unwithdrawn excess can count toward your non-concessional cap. The myGov running total is the way to stay under, especially after a job change mid-year.
Can I salary sacrifice if I’m self-employed or a contractor?
Not through the employer route, but a personal deductible contribution achieves the same result: contribute from your bank account, lodge a Notice of Intent with your fund, and claim the deduction at tax time.
Is salary sacrifice worth it on a lower income?
Below $45,000 of taxable income, the marginal rate for 2026-27 is 15% plus Medicare, so the saving versus the 15% contributions tax is minimal. At that level, the government co-contribution (up to $500 for eligible earners under $64,293 making after-tax contributions) usually delivers more per dollar.
When must a salary sacrifice arrangement be in place?
Before the relevant income is earned, agreed with your employer and documented. It cannot be applied retrospectively to salary already paid.
How do I check my carry-forward concessional cap balance?
Log into myGov, open ATO Online Services, then Super, then Information, then “Carry forward concessional contributions”. The figure shown is available on top of this year’s $32,500 cap, provided your total super balance was under $500,000 at the previous 30 June. Space expires five years after the year it arose; the 2021-22 year’s space expires 30 June 2027.
Want to know if you’re making the most of your cap?
Salary sacrifice looks simple, but the interaction between employer SG, the new cap, carry-forward amounts, Division 293 and your balance gets complicated quickly, and the cap increase means a lot of arrangements set before July are now leaving $2,500 of space unused.aving money in the concessional cap are leaving tax savings on the table.
If you want to work through whether you’re using this strategy as well as you could, book a free chat with the Wealthlab team. No sales pitch. Just clarity on where you stand.
