Superannuation is a powerful tool for building long-term wealth—but simply relying on your employer’s contributions may not be enough to retire comfortably. That’s where salary sacrificing comes in.
Making before-tax contributions to your super can boost your retirement savings and reduce your taxable income, meaning you pay less tax today while preparing for tomorrow.
“Would you rather hand more money to the tax man or add it to your future?” says Christine Swanson, Owner and Financial Adviser at Prominent Financial.
“The key to smart super planning is knowing how to use strategies like salary sacrifice to your advantage. Our role is to help you do that in a way that aligns with your broader financial goals.”
What Is Salary Sacrifice?
Salary sacrifice (also known as salary packaging) involves directing part of your pre-tax income into your super fund, on top of your employer’s compulsory super guarantee.
Because the contribution is taken out before income tax is applied, it lowers your taxable income, which may result in significant tax savings, especially for higher-income earners.
What Are the Benefits?
- Grow your super faster through compound returns
- Pay less tax (contributions are taxed at 15%, rather than your marginal tax rate)
- Lower your taxable income, potentially reducing Medicare Levy Surcharge and other taxes
- Automated saving, making it easier to stay disciplined
- Long-term peace of mind, knowing you’re building retirement security now
In some cases, salary packaging can also include other benefits, such as:
- Leasing a car (novated lease)
- Purchasing work-related tech (like a laptop)
- Receiving part of your income tax-free through eligible benefits
Case Study: Alex Takes Action
Alex earns $100,000 a year and decides to salary sacrifice $10,000 annually into super.
- This reduces their taxable income to $90,000
- They avoid paying income tax on that $10,000 (which would have been taxed at 32.5% or higher)
- Instead, the contribution is taxed at 15%, saving $1,750 in tax for the year
- Over time, that extra contribution compounds and grows their retirement balance significantly
For Alex, this strategy not only reduces current tax but also strengthens their retirement nest egg—without any lifestyle change, since it’s automated from payroll.
Things to Keep in Mind
Before getting started, there are a few considerations:
- Concessional contribution caps apply. The current cap is $30,000 per year (2024–25), but you may be able to contribute more if you’re eligible under the carry-forward rules.
- Reduced take-home pay—make sure your budget allows for the change
- Access—money contributed to super is generally locked away until you reach preservation age (currently 60)
- Your overall goals—make sure salary sacrificing fits with your broader financial strategy
- Investment risk—your super is invested and may fluctuate with market performance
Should You Consider It?
If you’re approaching retirement and looking for smart ways to maximise your super while minimising tax, salary sacrificing is worth exploring.
Christine Swanson notes:
“There’s no one-size-fits-all answer. That’s why working with a financial adviser matters. We help you weigh up the tax savings, cash flow impacts, and long-term benefits—so you can make the decision that’s right for you.”
Take Control of Your Super Strategy
At Prominent Financial, we specialise in helping Australians prepare for retirement with clear, tax-effective strategies that work. Whether it’s salary sacrifice, super contribution planning, or transition-to-retirement advice, we’ll tailor a solution to your unique needs.
📞 Want to find out if salary sacrifice is right for you?
Visit prominent.com.au or call 08 7325 3000 to book a complimentary consultation with our advice team.
Prominent Financial – Where smart decisions start.
Source:
- MLC: Is it worth salary sacrificing into super?
- Australian Taxation Office (ATO): Salary sacrifice and super
- MoneySmart: Super contribution strategies
