James earns $100,000. In July 2023 he asked his payroll team to send $435 of every fortnightly pay to his super fund before tax. That came to $11,310 over the 2023–24 year. He didn't get a raise or change jobs. Across his pay and his super fund, he paid about $2,200 less tax that year.
The tax rates have changed since then. The Stage 3 tax cuts lowered his rate on 1 July 2024, so the same sacrifice saves less now: about $1,920 at 2026–27 rates. It's still one of the simplest ways to cut tax on a salary, and it's been part of the super rules for decades.
What Salary Sacrifice Actually Is, In Plain English
Salary sacrifice into super means sending part of your before-tax pay straight to your super fund. Instead of that money landing in your bank account, where it's taxed at your marginal rate (up to 47% including the Medicare levy), it goes into super and is taxed at a flat 15%.
The gap between your marginal rate and 15% is your tax saving. The wider the gap, the bigger the saving.
James's Numbers: 2023–24 Then, 2026–27 Now
James earns $100,000 and sacrifices $11,310 a year ($435 a fortnight). His whole sacrifice comes off income in the same tax band, so each dollar saves the same amount.
| 2023–24 (when James did it) | 2026–27 (same sacrifice today) | |
|---|---|---|
| Tax rate on that income | 32.5% + 2% Medicare = 34.5% | 30% + 2% Medicare = 32% |
| Income tax and Medicare saved on $11,310 | $3,902 | $3,619 |
| Tax his super fund pays (15%) | $1,697 | $1,697 |
| Net tax saving | $2,205 | $1,923 |
| Saving per $1 sacrificed | 19.5c | 17c |
2023–24 uses the rates in force before Stage 3 (19% / 32.5% / 37% / 45%, with the 32.5% band running from $45,001 to $120,000). 2026–27 uses current rates (15% / 30% / 37% / 45%), worked out with Velofy's tax engine. Both include the 2% Medicare levy.
The arrangement works the same way it did. It's worth a little less because the 30% rate is lower than the old 32.5%, so there's less tax to save.
Savings at Every Income Level in 2026–27
You don't need to earn $100,000 for this to work. Here's what the numbers look like across incomes at 2026–27 rates:
| Annual Income | Tax Rate incl. Medicare | Salary Sacrifice | Annual Tax Saving |
|---|---|---|---|
| $65,000 | 32% | $5,000 | ~$925 |
| $80,000 | 32% | $10,000 | ~$1,700 |
| $100,000 | 32% | $10,000 | ~$1,700 |
| $135,000 | 32% | $15,000 | ~$2,550 |
| $160,000 | 39% | $13,000 | ~$3,120 |
Based on 2026–27 tax rates including the 2% Medicare levy, worked out with Velofy's tax engine (the 30% and 37% rates are unchanged since 2024–25). At $65,000 the saving is a little higher than 17c per dollar because a lower taxable income also brings back part of the low income tax offset. Your employer's 12% plus the amount you sacrifice must stay under the $32,500 cap: at $160,000 that leaves room for about $13,300.
The One Number You Need to Know: $32,500
The concessional contributions cap for 2026–27 is $32,500 a year. It was $30,000 for 2024–25 and 2025–26, and $27,500 in 2023–24, when James started. The cap includes your employer's Super Guarantee (12% since 1 July 2025), any salary sacrifice, and any personal contributions you claim as a deduction.
How to work out your room for 2026–27:
- Annual salary: e.g., $80,000
- Employer super: $80,000 × 12% = $9,600
- Room left under the cap: $32,500 − $9,600 = $22,900
- You can salary sacrifice up to $22,900 without going over the cap
The Carry-Forward Rule: Unused Cap From Earlier Years
If your total super balance was under $500,000 on 30 June 2026, you can add unused cap from the past five years (2021–22 to 2025–26) to this year's, so you could contribute more than $32,500 in 2026–27.
Example: Sarah is 38 and her super balance was $180,000 on 30 June 2026. In 2022–23 she used only $12,000 of that year's $27,500 cap, leaving $15,500 unused. If that's her only unused amount, she can add it to this year's $32,500 and make up to $48,000 of concessional contributions in 2026–27. To see what a catch-up contribution like Sarah's does to your balance at retirement, run it through the Velofy super calculator. It projects the year-by-year effect to any retirement age.
How to Set It Up: 4 Steps
- Check your room under the cap: how much of the $32,500 is your employer already using? Your payslip or myGov shows what your employer pays.
- Decide your contribution: use Velofy's Tax Advisor to model the saving at different amounts
- Email HR or payroll: ask to set up a salary sacrifice arrangement. Most employers process this in 1–2 pay cycles
- Lodge your tax return: your employer and super fund report the contributions to the ATO automatically
Velofy's salary sacrifice calculator shows your tax saving (cents per $1 at your marginal rate), how much of the cap you've used, and what the extra super could grow to over 30 years. Or use the broader tax calculator for deductions matched to your job.
Open Salary Sacrifice Calculator → Free · No account needed · 2026–27 ratesCovers concessional contribution caps, carry-forward rules, Division 293 tax, and how to work out your tax saving at different income levels.
Shop on Amazon AU →Includes salary sacrifice modelling worksheets, super contribution logs, and annual tax-saving calculators — the physical complement to Velofy's digital tool.
Shop on Amazon AU →Frequently Asked Questions
How much tax do you save with salary sacrifice into super in Australia?
The difference between your tax rate and the 15% your super fund pays. On a $10,000 sacrifice at a 32% rate (30% plus the 2% Medicare levy), you save $1,700 a year. At 39% (37% plus Medicare) it's $2,400, and at the top rate of 47% it's $3,200.
Why does the same salary sacrifice save less tax now than in 2023–24?
Because the tax rate on most middle incomes fell. From 1 July 2024, income between $45,000 and $135,000 is taxed at 30%; in 2023–24 income between $45,000 and $120,000 was taxed at 32.5%. Less tax on that income means less tax to save. At $100,000, each dollar sacrificed saved 19.5c in 2023–24 and saves 17c in 2026–27, counting the 2% Medicare levy and the fund's 15% tax.
What is the salary sacrifice super cap for 2026–27?
The cap on before-tax (concessional) contributions is $32,500 for 2026–27. It was $30,000 for 2024–25 and 2025–26. Your employer's 12% Super Guarantee counts toward it, along with any salary sacrifice and personal contributions you claim as a deduction.
Does salary sacrifice affect my take-home pay?
Yes, but by less than the amount you sacrifice. Sacrificing $10,000 cuts take-home pay by about $6,800 at a 32% tax rate, or $6,100 at 39%, because the rest would have gone in income tax. That money goes into your super instead of to the ATO.
What happens if I exceed the concessional contributions cap?
The excess is added to your taxable income and taxed at your normal rate, with a 15% tax offset for the tax your fund already paid. The ATO sends you a determination, and you can choose to have up to 85% of the excess released from your super to help pay the bill.