Salary sacrifice into your super

Salary sacrificing is an easy way of contributing more to your superannuation.

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Salary sacrificing is a way of contributing to your super and involves diverting part of your pre-taxed income into your super fund. Contributing to your super fund from your pre-taxed income ultimately reduces the amount of tax you pay, making it an attractive option for anyone looking to top up their super balance.

This guide will explain how salary sacrificing into your super works, how to set it up and what to consider before going ahead. If salary sacrificing isn’t for you, we’ve also outlined some other ways of contributing to your super.

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Spaceship's investment portfolio has a strong focus on technology ETFs.

Spaceship's GrowthX fund is a high-growth option with increased exposure to Australian and international shares, aiming for strong long-term returns.
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Green Company
Certified by the Responsible Investment Association Australasia.

This fund invests in renewable energy, innovative technology and sustainable products while avoiding coal, oil, tobacco and live animal exports.

How salary sacrifice into superannuation works

Salary sacrifice is the process of redirecting a percentage of your salary or wage into something else. You can set up a salary sacrifice agreement with your employer to help pay off a car, your mortgage payments or to top up your super.

Salary sacrifice into your super fund means, come payday, a percentage of your wage will be sent to your super account rather than into your bank account. These are classed as concessional contributions, because the money that’s sent to your super account is diverted before you’re charged any income tax on it. This is the main benefit of salary sacrificing into your super.

You can elect how much of your pre-taxed income you want to send to your super account instead, although limits do apply (we’ve outlined these limits below). If you want to salary sacrifice into your super this is something you can arrange directly with your employer instead of with your super fund.

Salary sacrificing into your super has many benefits

  • Pre-tax super contributions. Salary sacrificing is classed as a concessional contribution, meaning it’s part of your pre-tax income. This money will instead be taxed at the reduced super tax rate of 15%, rather than your marginal tax rate which could be as high as 45%.
  • Set-and-forget strategy. Salary sacrificing into your super is a great way to make passive contributions to your super. Once you’ve set it up there’s nothing else you need to do – the contributions will automatically be made each time your employer pays you.
  • Your employer handles the admin. Your employer will set up your salary sacrifice contributions with your super fund, so there’s not much admin involved for you.
  • Benefit from compound returns. By making regular contributions to your super from a young age, you’ll benefit from compounded investment returns.
  • No fees. There are no fees charged to make concessional contributions to your super via salary sacrifice.
  • Benefits to those earning more than $37,000. Those with a salary above $37,000 stand to benefit the most from salary sacrificing into super. Instead of paying the marginal tax rate of up to 45%, that income will instead only be taxed at 15%.

What to consider before salary sacrificing into super

Salary sacrificing has many benefits, but there are also a few things to consider before setting it up.

  • It’s part of the super guarantee. Your employer is required to pay you the super guarantee, which is currently set at 9.5% of your salary. If you elect to salary sacrifice part of your wage into your super, this is counted as part of the super guarantee from your employer rather than another contribution on top of this, unless you negotiate otherwise.
  • Less money at payday. If you elect to send a portion of your salary to your super you’ll end up with less money in your bank account come payday.
  • You can’t access the money. Once you’ve sent the money to your super fund, you can’t access this money until you retire or reach your preservation age. So it’s important to ensure you won’t need the money to meet your financial obligations, such as rent, bills or in the event of an emergency.
  • Limits apply. There are limits as to how much you can contribute to your super, which are outlined below.
  • Not worth it if you earn below $37,000. If you earn below $37,000 your income is only taxed at 19%, so it might not be worth salary sacrificing as you’d only be taxed 4% less.

There are limits to how much you can salary sacrifice into super

Salary sacrificing is classed as a concessional contribution and there are limits as to how many concessional contributions you can make each year. Your concessional contributions can’t be more than $25,000 p.a., which includes both your salary sacrificed contributions and those made by your employer as part of the super guarantee.

As an example, let’s say you earn $150,000 a year. To meet the 9.5% super guarantee requirement your employer needs to contribute $14,250 to your super a year. This means you can only make up to $10,750 worth of additional pre-tax contributions.

How else can I make contributions to my superannuation?

There are four main ways you can contribute to your super.

  • Employer contributions. This is the main source of money paid into an individual’s superannuation account. According to the superannuation guarantee, an employer must pay at least 9.5% of an employee’s gross salary into their super account every quarter.
  • Concessional contributions. You can arrange for your employer to pay some of your pre-tax salary into your super fund as an additional contribution, known as salary sacrifice. But remember, your contribution allowance is capped at a maximum of $25,000 a year including all your employer and concessional contributions.
  • Non-concessional contributions. A non-concessional contribution is one you make from your post-tax salary. This means you’ve already received the money into your bank account and paid the full tax rate. The cap for these contributions is currently $100,000 a year.
  • Government contributions. If you earn below $36,813 you may be eligible for the government super co-contribution. This means that if you choose to make non-concessional (post-tax) contributions, the government will add $0.50 for each dollar you deposit up to $500.

More tips to grow your super

Salary sacrificing is just one of the many strategies you can use to grow your super balance. To learn about the other ways you can increase your balance, take a look at our guide to growing your superannuation.

Compare super funds

Name Product Last 1 year performance Last 3 year performance Last 5 year performance Last 10 year performance Annual fees on $50k balance
Spaceship GrowthX
23.41%
15.25%
N/A
N/A
$536
This is a high-risk investment option that aims to deliver high returns over the long term.
Spaceship's GrowthX fund invests heavily in technology ETFs with high exposures to Australian and international shares. Performance figures and fees supplied by Spaceship, not Chant West.
Sunsuper Lifecycle Balanced
20.62%
8.77%
9.84%
9.06%
$558
Sunsuper is an award-winning super fund with more than 1.4 million members. Its Lifecycle Balanced option invests your super in a mix of growth assets, and reduces your risk when you're near retirement.
Australian Ethical Super Balanced
17.96%
10.33%
9.67%
9.01%
$622
Certified by the Responsible Investment Association Australasia.
Australian Ethical seeks to invest in companies that have a positive impact on the planet, people and animals, such as renewable energy and healthcare while avoiding investments in coal, oil, tobacco and gambling.
QSuper Lifetime - Aspire 1
17.11%
9.02%
8.61%
N/A
$360
QSuper is one of the largest and oldest member-owned funds in Australia. The QSuper Lifetime fund automatically personalises a your investment strategy based your age and account balance.
UniSuper Balanced
17.6%
9.23%
9.55%
9.55%
$326
UniSuper is an industry super fund and one of Australia's largest super funds with more than 450,000 members. Its Balanced option invests in a mix of different asset classes and has achieved consistently high returns for members.
Virgin Money Super - Lifestage Tracker
22.17%
10.04%
N/A
N/A
$363
Virgin Money Super Lifestage Tracker has some of the lowest fees in the market. It invests in a range of different assets in line with your age, reducing your risk as you get older. Plus, you can earn Velocity Frequent Flyer Points when you rollover your super, and on the contributions you make (T&Cs apply).
Aware Super Growth
18.02%
8.81%
9.8%
8.97%
$519.42
Aware Super is a not-for-profit fund with more than 750,000 members. The MySuper product invests your super in a pre-mixed Growth fund until you’re 60, then it’ll switch to Balanced.
HESTA Balanced Growth
19.03%
8.48%
9.39%
8.87%
$533.53
HESTA is an industry super fund for the health and community services sector and open to all Australians. The Balanced Growth fund invests in a mix of asset classes without taking on too much, or too little, risk.
LUCRF MySuper Balanced
18.66%
7.64%
8.44%
7.96%
$497.64
LUCRF Super is an industry super fund open to all Australians with 11 different investment options available. Its default MySuper Balanced option is a simple, diversified portfolio designed to suit most members.
Australian Catholic Super Lifetime - Grow
17.36%
7.42%
N/A
N/A
$528
A Catholic super fund open to all Australians and designed for people working in Catholic education, healthcare or aged care.The Lifetime One fund option changes your investment mix as you get older.
Verve Super Balanced
6.2%
N/A
N/A
N/A
$691.10
Verve Super is an ethical super fund tailored for women. It seeks to invest in companies making a positive impact, such as renewable energy and women in leadership, while avoiding those that cause harm, such as fossil fuels, tobacco and guns.
Aware Super - Diversified Socially Responsible Investment
15.23%
8.1%
8.28%
8.12%
$406.18
The Aware Super Diversified Socially Responsible Investment is a pre-mixed investment option that excludes companies operating in the tobacco, ammunition, gambling, alcohol, forest logging and pornography industries, as well as companies that attribute 20% or more of their revenue to coal, oil and gas.
Sunsuper - Socially Conscious Balanced
19.6%
8.76%
8.83%
8.25%
$463
Certified by the Responsible Investment Association Australasia.
The Sunsuper Socially Conscious Balanced option avoids investment in companies that have significant exposure (more than 5% of revenue) to alcohol, tobacco, gambling, pornography, coal and nuclear power manufacturing. Investment performance as of 30 June 2020.
HESTA - Sustainable Growth
23.03%
11.93%
11.78%
11.28%
$780.29
HESTA Sustainable Growth is a pre-mixed, diversified investment option with a high to very high risk level. The investment managers take into account the social and environmental impact of the companies in which it invests, and excludes investment in tobacco, fossil fuels, uranium and weapon manufacturing. Investment performance as of 30 June 2020.
Australian Catholic Super Bonds
0.65%
5.04%
3.92%
4.1%
$488
Australian Catholic Super Conservative
9.31%
5.64%
5.57%
5.75%
$538
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The information in the table is based on data provided by Chant West Pty Ltd (AFSL 255320) which is itself supplied by third parties. While such information is believed to be accurate, Chant West does not accept responsibility for any inaccuracy in such information. Chant West’s Financial Services Guide is available at https://www.chantwest.com.au/financial-services-guide . Finder offers no guarantees or warranties about the data and we recommend that users make their own enquiries before relying on this information. Performance, fees and insurance data is based on each fund's default MySuper product. Where the performance, fees and insurance data for the MySuper fund vary according to the member's age, results for individuals between 40-49 years of age have been shown. Past performance is not a reliable indicator of future performance.

*Past performance data is for the period ending June 2021.

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