Key facts at a glance
Concessional cap
$32,500
2026-27, shared across SG + sacrifice
SG rate
12%
Unaffected by sacrifice
Contributions tax
15%
Inside your fund, vs your marginal rate
Here's the real math on a common scenario: earn $120,000 and sacrifice $10,000 a year into super, and your take-home pay drops by $6,800, not the full $10,000, because you save $3,200 in income tax and Medicare Levy along the way. That $10,000 then lands in your fund taxed at a flat 15% instead of your 32% marginal rate (30% tax plus 2% Medicare Levy), adding $8,500 to your super after fund tax, versus the $12,240 you'd have banked from Super Guarantee alone with no sacrifice. Net result: you give up $6,800 in cash to gain $8,500 in super, a $1,700 annual win purely from the tax arbitrage, before investment growth is even counted.
Whether that trade is worth it for you depends on your marginal tax rate, how close you are to the $32,500 concessional cap for 2026-27, and how much you value cash today versus super you can't touch until preservation age. The mechanics are simple once you see them laid out. Below is exactly how the numbers work, when the arbitrage stops paying off, and the traps around Division 293 and the concessional cap that a quick mental estimate will miss.
Run your own salary and sacrifice amount through the real 2026-27 formula.
Open the sacrifice calculatorWhat salary sacrifice actually is, and how the tax saving works
Salary sacrifice is an agreement with your employer to redirect part of your pre-tax gross salary into your super fund instead of receiving it as cash in your bank account. It's entirely voluntary, entirely separate from the 12% Super Guarantee your employer already owes you, and it only makes sense once you understand what happens to that redirected dollar twice over.
First, your taxable income drops by whatever you sacrifice, so your income tax and Medicare Levy are calculated on the smaller number. Second, the sacrificed amount doesn't disappear from your marginal rate untouched, it gets taxed inside your fund at a flat 15% contributions tax, generally well below the 30%, 37%, or 45% marginal rates (plus the 2% Medicare Levy) that same dollar would face if you took it as ordinary pay. For anyone earning above the $45,000 threshold where the 30% bracket starts, that gap between 15% and your real marginal rate is the entire reason salary sacrifice super tax savings work at all. It's not a loophole, it's the ATO's own deliberate design to encourage voluntary retirement saving.
The 2026-27 concessional cap: $32,500, and it's shared
The concessional contribution cap for 2026-27 is $32,500, up from $30,000 in 2024-25 and 2025-26, reindexed to Average Weekly Ordinary Time Earnings. The part people miss is that it's one combined bucket, not a separate allowance for each contribution type. Your employer's 12% Super Guarantee, whatever you salary sacrifice, and any personal contributions you claim a tax deduction for all draw from the same $32,500 in a financial year. On a $120,000 salary, SG alone is $14,400, leaving about $18,100 of headroom for sacrifice before you'd bump the cap, assuming no other deductible contributions in the mix.
There's a genuine planning lever worth knowing about too: carry-forward (or "catch-up") concessional contributions. If your total super balance was under $500,000 on the previous 30 June, you can use unused cap room from the past five financial years on top of the current year's $32,500, which could let you sacrifice considerably more in a single year, say a bonus year or before a career break, without breaching the cap. A basic sacrifice calculator generally can't see your five-year contribution history, so it applies the plain $32,500 current-year cap and flags anything over that as a warning. That makes the warning conservative: more likely to over-warn than to miss a real breach, so if you know you have carry-forward room, treat any cap warning as a prompt to check your own numbers, not a hard stop.
Worked case study: $120,000 salary, $10,000 sacrificed
Here's the full side-by-side, run through the actual 2026-27 resident tax brackets and Medicare Levy, comparing no sacrifice against sacrificing $10,000 a year.
| Line item | No sacrifice | $10,000 sacrificed |
|---|---|---|
| Gross salary | $120,000 | $120,000 |
| Taxable income | $120,000 | $110,000 |
| Income tax | $26,520 | $23,520 |
| Medicare Levy (2%) | $2,400 | $2,200 |
| Take-home pay | $91,080 | $84,280 |
| Super Guarantee (12%) | $14,400 | $14,400 |
| Salary sacrifice | $0 | $10,000 |
| Total concessional contributions | $14,400 | $24,400 |
| 15% contributions tax | $2,160 | $3,660 |
| Net amount into super | $12,240 | $20,740 |
Take-home pay falls by $6,800 (not the full $10,000 sacrificed), because the sacrifice saves $3,200 in income tax and Medicare Levy. Meanwhile super grows by $8,500 more than it would have on SG alone ($20,740 versus $12,240). Give up $6,800 in cash, gain $8,500 in super: a $1,700 net benefit purely from the 17-percentage-point gap between your 32% marginal rate on that slice of income and the 15% contributions tax. That $1,700 figure is exact, not a rough estimate: $10,000 x (32% - 15%) = $1,700. Both scenarios sit comfortably under the $32,500 concessional cap, using $24,400 of it with $8,100 left in reserve.
Run your own salary and sacrifice amount
See your exact tax saved, take-home reduction, net super inflow, and cap headroom, calculated the same way as the worked example above.
Open the AU Super Salary Sacrifice CalculatorWhen salary sacrifice is not worth it
High earners near Division 293. If your combined income and concessional contributions exceed $250,000, Division 293 tax adds an extra 15% (30% total) on contributions above that threshold. The arbitrage that makes sacrifice attractive at a 32% or 34.5% marginal rate shrinks fast once you're paying 30% inside the fund instead of 15%. A simple sacrifice calculator won't catch this because it depends on a broader income test than gross salary alone, so it's worth checking your own position before assuming the full standard benefit applies.
Cash-flow and preservation-age lock-in. Super is locked away until you reach preservation age (60 for most people currently working) and meet a condition of release. If you need that $10,000 for a mortgage deposit, a business, or genuine short-term cash-flow, the tax saving means nothing if the money isn't there when you need it. Sacrifice only what you're genuinely comfortable not touching for years, sometimes decades.
Breaching the concessional cap. Push your combined SG and sacrifice over $32,500 and the excess gets added back to your assessable income at your marginal rate, plus an excess concessional contributions charge on top, materially worse than the flat 15% you were aiming for. Check your SG-plus-sacrifice total against the cap before locking in an arrangement, especially if you're also making deductible personal contributions.
Your employer can't use sacrifice to cut what they owe you
Since 1 January 2020, the SG "integrity" amendment requires employers to calculate your Super Guarantee on your Ordinary Time Earnings as if you had never sacrificed anything. Your 12% SG for 2026-27 always sits on top of whatever you sacrifice, never reduced by it. This matters if you're comparing salary sacrifice to salary packaging structures like novated leases, where the mechanics of "on top of" versus "inclusive of" salary work quite differently.
If you're weighing sacrifice against other salary-packaging options, see how novated leases work as a comparison, or check whether your own package is quoted on top of or inclusive of super before adding voluntary sacrifice on top.
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Frequently asked questions
Does salary sacrifice reduce my employer's Super Guarantee obligation?
No. Since the SG "integrity" amendment took effect on 1 January 2020, your employer must calculate your Super Guarantee on your Ordinary Time Earnings as if you had never entered a salary sacrifice arrangement at all. You cannot sacrifice your way into a smaller SG entitlement, and an employer cannot use your sacrifice to shrink what they owe you. The 12% SG for 2026-27 lands on top of whatever you sacrifice, not instead of it, so the two amounts stack toward your concessional cap rather than substituting for each other.
What is the concessional contributions cap for 2026-27, and what counts toward it?
$32,500 for the 2026-27 financial year, up from $30,000 in 2024-25 and 2025-26, reindexed to AWOTE. It's a single combined bucket: your employer's 12% Super Guarantee, anything you salary sacrifice, and any personal contributions you claim a tax deduction for all draw from the same $32,500, not separate allowances. On a $120,000 salary your SG alone is $14,400, which leaves roughly $18,100 of cap room for sacrifice and deductible contributions before you'd need to think about the excess contributions rules.
Can I salary sacrifice on a low income?
You can, but the tax arbitrage that makes sacrifice worthwhile shrinks or disappears below a certain point. The whole mechanism relies on redirecting income taxed at your marginal rate (plus the 2% Medicare Levy) into a fund taxed at a flat 15%. If your taxable income sits inside the tax-free threshold (up to $18,200) or the 15% bracket, the gap between your marginal rate and the 15% contributions tax is small or nonexistent, so sacrificing can leave you worse off in pure tax terms, even though the money is still locked away growing for retirement. It generally starts paying off once you're solidly into the 30% bracket and above.
What is Division 293 tax, and does it affect salary sacrifice?
Division 293 is an extra 15% tax (30% total, instead of the usual 15%) on concessional contributions for individuals whose combined income and contributions exceed $250,000 in a financial year. It's a real cost for higher earners that a simple sacrifice calculation won't show you, because it depends on a broader income definition than gross salary alone. If you're earning well into six figures and sacrificing a meaningful amount, it's worth checking where you sit relative to that $250,000 threshold before assuming every dollar sacrificed saves you the full standard margin.
What is carry-forward, and could it let me sacrifice more than $32,500 in one year?
Yes, if you qualify. Carry-forward (technically "catch-up") concessional contributions let you use unused cap room from the previous five financial years, provided your total super balance was under $500,000 on 30 June before the year you're contributing in. That means someone who didn't use their full cap in prior years could legitimately sacrifice well above $32,500 in a single year without triggering the excess contributions charge. A straightforward sacrifice calculator generally doesn't know your five-year contribution history, so it applies the current-year $32,500 cap on its own and flags anything over that as a warning, deliberately erring toward over-warning rather than missing a real breach.
What happens if I go over the concessional cap?
The excess amount gets added back to your assessable income and taxed at your marginal rate, plus you're hit with an excess concessional contributions charge on top, which is materially worse than the flat 15% you'd otherwise pay. This is the main reason to actually check your combined SG-plus-sacrifice total against $32,500 before locking in an arrangement with payroll, rather than picking a round number and hoping.
How do I actually set up salary sacrifice with my employer?
You'll need a written salary sacrifice arrangement with your employer (most HR or payroll teams have a standard form for this), agreed before the income is earned, since you can't retrospectively sacrifice salary you've already been paid. Once it's set up, your payslip should show the sacrificed amount coming out of your pre-tax pay each period, separate from your employer's standard 12% SG contribution. It's worth checking your first couple of payslips after setup to confirm the sacrificed amount is actually landing in your fund and your taxable income has dropped as expected, rather than assuming the paperwork alone did the job. The process is identical whether you're on payroll in Sydney, Melbourne, Brisbane, or anywhere else in the country, since it's federal ATO rules, not state ones, that govern it.
Why did my super only grow by $8,500 when I sacrificed a full $10,000, doesn't that mean I lost money?
It feels like a loss at first glance, but you're comparing the wrong two numbers. The right comparison isn't $10,000 sacrificed versus $8,500 landed, it's $8,500 landed in super versus the $6,800 you'd have kept as cash if you hadn't sacrificed at all. The 15% contributions tax does take a real bite ($1,500 on a $10,000 contribution), but that bite is smaller than the income tax and Medicare Levy that same $10,000 would have faced as ordinary salary. You're not losing $1,500, you're paying a lighter tax than you otherwise would, which is the entire point of the arrangement.
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