Salary Sacrifice Super — How It Works

ATO rules: agreement, caps, timing and surcharge in plain English

How an Arrangement Works

A salary sacrifice agreement between you and your employer redirects part of salary or wages into super before PAYG withholding. The sacrificed amount is not assessable salary, is not subject to fringe benefits tax where paid to a complying fund, and must appear in reportable super contributions on your return. Critically, sacrificed amounts do not reduce the ordinary-time-earnings base for SG — your employer must still pay full 12% SG as if no arrangement existed. Agreements should be prospective and documented, including timing provisions so June contributions land in-fund by June 30, because caps count on receipt, not payroll date. See the ATO salary sacrificing super guidance and our super caps guide.

From July 2026 the concessional cap is $32,500 covering SG, sacrifice and personal deductible combined, with carry-forward where balance is under $500,000. Amounts above the cap become excess concessional contributions taxed at marginal rates less 15% offset — and unreleased excess can count toward non-concessional caps at up to 94% effective tax. Test combinations in our super optimizer.

When Salary Sacrifice Wins (and When It Does Not)

Sacrifice wins where marginal rates exceed 15% fund tax with headroom under caps — for example $110,000 salary sacrificing $10,000 saves roughly $1,950 net of fund tax at 34.5% marginal. It weakens near Division 293 ($250,000 income plus concessional), where an extra 15% applies to the lesser of excess or concessional, lifting fund tax to 30%. It also weakens where cash flow is tight, HELP debts index while cash is locked, or insurance inside super would be eroded. Low earners under $37,000 may do better via LISTO on mandated contributions than extra sacrifice.

Payday Super and June Timing Traps

From 2026 payday super requires SG paid within 7 business days of each payday with real-time ATO visibility — late payment draws Super Guarantee Charge (salary plus 12% plus interest, non-deductible). For caps, only receipt dates matter: a salary-sacrifice amount sacrificed in June but received in July counts next financial year and can bust both years' planning. Build a June buffer — stop salary sacrifice top-ups by early June unless payroll guarantees same-month receipt — and confirm via fund transaction dates, not payslips. Carry-forward users should sequence large catch-ups early in the year, keeping June headroom for SG corrections. Your agreement should state cut-off payroll dates explicitly.

Interaction traps compound: HELP repayments index while cash is locked in super; LISTO ($500 max under $37,000) may beat sacrifice for low earners; spouse contributions ($540 offset to $40,000 income) may beat extra concessional near Division 293. A good SOA tables all three options with net-dollar outcomes rather than defaulting to sacrifice.

What Your SOA Must Show

A compliant recommendation quantifies SG plus sacrifice plus deductible against $32,500, confirms carry-forward unused amounts via ATO online, models Division 293 net benefit, states receipt-timing controls for June, and compares alternatives (personal deductible with Section 290-170 notice, spouse split, non-concessional bring-forward). Vague sacrifice more language without caps maths is a suitability gap — run an AdviserCheck review before payroll changes.

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Frequently Asked Questions

Does sacrifice reduce my SG?
No. SG is calculated as if no arrangement existed. Check payslips — underpaid SG is reportable.

What if I exceed $32,500?
Excess is included in assessable income with a 15% offset; unreleased amounts may count toward non-concessional caps. Amend the agreement promptly.

Does Division 293 apply to sacrifice?
Yes — all concessional counts toward the $250,000 test. Carry-forward amounts are included too.

Sacrifice or personal deductible?
Similar caps treatment; deductible offers timing control via 290-170 notices, sacrifice offers payroll automation. SOA should compare both.