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Is it worth salary sacrificing into super
September 2025
We're all familiar with the concept of super. It's that portion of our salary that employers are required to contribute to a super fund on our behalf, with the goal of providing us with financial security in retirement.
But what not everyone is aware of is that relying solely on your employer's contributions might not be enough to ensure a comfortable retirement. That's where salary sacrificing into super comes into play.
Here, we'll explore the ins and outs of salary sacrificing into your super and help you determine if it's worth considering as part of your financial strategy.
What is salary sacrificing into super?
Salary sacrificing into super involves redirecting a portion of your pre-tax salary into your super fund. Instead of receiving this portion as part of your take-home pay, it goes straight into your super account.
Here's how it works:
- Agreement - You and your employer agree to salary sacrifice a specific amount or percentage of your pre-tax salary into your super fund. This amount is in addition to the compulsory employer contributions.
- Pre-tax - The sacrificed amount is deducted from your gross (pre-tax) salary, reducing your taxable income. This means you pay less income tax on your take-home pay.
- Super contributions - The sacrificed amount is added to your superannuation contributions, helping you build a more substantial retirement nest egg.
Benefits of salary sacrificing into super
Now that we've covered the basics of salary sacrificing into super, let's explore the benefits of this strategy:
- Tax savings - One of the primary advantages of salary sacrificing into super can be the potential for significant tax savings. The sacrificed amount is taxed at the concessional super tax rate of 15%, which is typically lower than the tax rate you pay on your income. This means you get to keep more of your money while still saving for retirement. You may pay additional 15% tax on all or part of your salary sacrifice if your income exceeds $250,000. In this case, the effective tax on your contributions may be up to 30%, which is still less than the highest tax rate of 45%.
- Faster retirement savings growth - By contributing more to your super fund through salary sacrificing, you're accelerating the growth of your retirement savings. Your money is invested over an extended period, potentially leading to more substantial gains through compound investment returns. Compound investment returns refer to earning money not just on the original investment but also on the accumulated growth gained over the period since the investment was made.
- Lower taxable income - Since the sacrificed amount is deducted from your pre-tax salary, your taxable income is reduced. This can have several additional benefits, such as qualifying you for certain concessions, reducing the Medicare Levy, and helping you stay in a lower tax bracket (salary sacrifice super contributions are not subject to the Medicare Levy or the Medicare Levy Surcharge. This can lead to significant tax savings, especially for higher-income earners.)
- Automatic savings - Salary sacrificing is an automated process. The money is taken out of your pay before you even see it, which can help you build disciplined savings habits.
- Long-term financial security - Salary sacrificing into super is a smart way to attain long-term financial security during your retirement years. It provides peace of mind, knowing that you're taking proactive steps to build a comfortable retirement nest egg.
Things to consider before salary sacrificing into super
While salary sacrificing into super offers numerous advantages, it's essential to consider some factors before taking the plunge:
- Contribution caps - Salary sacrifice contributions count towards your concessional contribution cap. The annual limit for concessional contributions, including your salary sacrifice contributions, into super without incurring additional tax in Australia is $30,000 for 2025-26. The cap limits change over time so it’s important to be aware of the current contribution cap limit. Those who have a superannuation balance of less than $500,000 on 30 June 2025 may have a concessional cap of up to $167,500 in 2025/26. This includes the current annual $30,000 cap, $25,000 for 2020/21, $27,500 for 2021/22 to 2023/24 and $30,000 in 2024/25. This is based on the five-year carry forward rule.
- Your financial goals - Consider your overall financial goals when deciding how much to salary sacrifice into super. You should strike a balance between your short-term and long-term financial needs. If you have pressing financial commitments, it might not be wise to sacrifice too much of your current income. What kind of lifestyle do you envision for your retirement? The more comfortable you want it to be, the more you may need to save.
- Reduced take-home pay - Salary sacrificing means you'll have less money in your take-home pay. This can be challenging if you're on a tight budget or have immediate financial needs, such as your mortgage.
- Investment risk - Your salary sacrifice contributions are invested, and like any investment, they come with inherent risks. Depending on market performance, your super balance can fluctuate.
- Access to funds - Remember that once your money is in your super fund, you generally can't access it until retirement, or you meet certain conditions. Ensure you have enough liquid assets outside of super, such as cash or shares, to cover emergencies or short-term financial needs. Super is designed for retirement savings, so accessing your money before you reach preservation age can be challenging. Since 1 July 2024, the preservation age is 60.
- Seeking advice - It's a good idea to consult with a financial adviser or accountant before implementing a salary sacrifice strategy. They can help you assess your unique financial situation and provide personalised recommendations.
Is it worth salary sacrificing into super?
Now that we've examined the pros and cons of salary sacrificing into super, the question remains: is it worth it for you?
The answer depends on your individual financial circumstances and goals. Do you have outstanding debts or immediate financial needs that should take priority over extra super contributions? It's crucial to have a solid financial foundation before diverting funds into super.
For many Australians, especially those who can afford to do so, salary sacrificing into super can be a highly effective way to boost retirement savings, enjoy tax benefits, and secure long-term financial stability.
Higher-income earners tend to benefit more from salary sacrificing due to the potential for substantial tax savings, but the benefits are not exclusive to that income bracket.
It is sensible to strike a balance that suits your overall financial plan and to stay informed about any changes in legislation or contribution caps. As your financial circumstances are unique to you, consider seeking professional advice to help you make the best decision for your future.
The information in this article is current as at September 2025 and may be subject to change.
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This article has been prepared for OnePath Custodians Pty Limited (OPC) ABN 12 008 508 496, AFSL 238346 as Trustee of the Retirement Portfolio Service (ABN 61 808 189 263). OPC is part of the Insignia Financial group of companies comprising Insignia Financial Limited ABN 49 100 103 722 and its related bodies corporate (Insignia Financial Group).
The information in this article is current as at September 2025 and may be subject to change.
You should read the relevant Financial Services Guide (FSG), Product Disclosure Statement (PDS), Target Market Determination (TMD), Additional Information Guide (AIG), Investment Funds Guide (IFG), and product and other updates (for open and closed products) available at onepath.com.au and consider whether OnePath products are right for you before making a decision to acquire, or to continue to hold any OnePath product. Alternatively, you can request a copy of this information by calling Customer Services on 133 665.
Taxation law is complex, and this information has been prepared as a guide only and does not represent taxation advice. Please see your tax adviser for independent taxation advice.
Before re-directing your super or moving your money into your product, you will need to consider whether there are any adverse consequences for you, including loss of benefits (e.g. insurance cover), investment options and performance, functionality, increase in investment risks and where your future employer contributions will be paid. Any investment is subject to investment risk, including possible repayment delays and loss of income and principal invested. Returns can go up and down. Past performance is not indicative of future performance.
The information provided is of a general nature and does not take into account your personal needs, financial circumstances or objectives. Before acting on this information, you should consider the appropriateness of the information, having regard to your needs, financial circumstances or objectives. The case studies used in the articles on this website are hypothetical and are not meant to illustrate the circumstances of any particular individual. Opinions expressed in this document are those of the authors only.