Salary sacrificing super: what changes your fortnightly take-home pay

How salary sacrificing super changes your take-home pay

When you salary sacrifice into super, you swap part of your pre-tax salary for a contribution to your super fund. This lowers your taxable income, so you pay less income tax and Medicare levy. But the amount that lands in your bank account each fortnight depends on your tax bracket, the Medicare levy, and the contribution caps.

Tax brackets and the Medicare levy

For the 2026–27 tax year, the resident tax rates are:

• $0–$18,200: Nil
• $18,201–$45,000: 15c for each $1 over $18,200
• $45,001–$135,000: $4,020 plus 30c for each $1 over $45,000
• $135,001–$190,000: $31,020 plus 37c for each $1 over $135,000
• $190,001 and over: $51,370 plus 45c for each $1 over $190,000

On top of that, most people pay a Medicare levy of 2% of taxable income. If your taxable income is below $28,011, you pay no levy. Between $28,011 and $35,013, you pay 10c per dollar over the lower threshold. Above $35,013, you pay the full 2%. These thresholds are the latest published single-person figures from the Australian Taxation Office.

What salary sacrificing super does

As the Australian Taxation Office explains, a salary sacrifice arrangement lets you direct part of your salary into your super fund before tax. These contributions are taxed inside the super fund at 15%, which is usually lower than your marginal tax rate. The sacrificed amount is not subject to PAYG withholding, so your take-home pay is reduced by less than the amount sacrificed.

For example, if you earn $60,000 and sacrifice $5,000 into super, your taxable income drops to $55,000. Your tax (excluding Medicare) falls from $8,520 to $7,020 – a saving of $1,500. After the Medicare levy (2% of $55,000 = $1,100), your total tax is $8,120, compared to $9,720 without the sacrifice. Your take-home pay decreases by the net amount after tax savings.

Fortnightly impact

Your employer will deduct the sacrificed amount from your gross pay each fortnight. The exact change to your bank deposit depends on your marginal tax rate and Medicare levy. Use the Take-home pay guide to estimate your after-tax salary with and without salary sacrifice.

Limitations to watch

There is no legal limit on how much you can salary sacrifice into super, but there are tax consequences. The concessional contributions cap is $32,500 for 2026–27. This includes your employer's 12% super guarantee and any salary sacrifice amounts. If you exceed the cap, the excess is taxed at your marginal rate. Also, if your combined income and concessional contributions exceed $250,000, you may pay Division 293 tax (an extra 15% on contributions above that threshold).

Salary sacrifice contributions are classified as employer contributions, not personal contributions. They do not reduce the amount your employer uses to calculate your super guarantee. Your employer must still pay the full 12% on your ordinary salary, as if no sacrifice existed.

Is it worth it?

Salary sacrificing super can be tax-effective if you are in a higher tax bracket and you stay within the caps. However, it reduces your immediate take-home pay. The Moneysmart website notes that salary packaging may help you pay less income tax, but it depends on your income and the benefits offered. Always consider your cash flow needs and long-term super goals.

For a full breakdown of how tax brackets and the Medicare levy affect your fortnightly pay, see the Tax and Medicare page. If you earn the national minimum wage ($26.44 per hour, $1,004.90 per week), salary sacrifice may still be an option, but the tax savings are smaller due to the lower marginal rate.

Summary

Salary sacrificing super reduces your taxable income, lowering your income tax and Medicare levy. Your fortnightly take-home pay decreases by less than the amount sacrificed because of the tax savings. The exact change depends on your marginal tax rate, the Medicare levy thresholds ($28,011 and $35,013), and the concessional cap of $32,500. Always check with your employer and a financial adviser before setting up a salary sacrifice arrangement.