Pros, Cons & 2025 Limits Explained

Salary sacrificing into superannuation is a powerful and underused strategy for building wealth in Australia. It’s tax-effective, easy to set up, and can significantly grow your retirement balance over time. But it’s not a one-size-fits-all solution.

What Is Salary Sacrificing Into Super?

Salary sacrificing is when you ask your employer to contribute a portion of your pre-tax salary directly into your superannuation fund — on top of the compulsory Super Guarantee (SG).

Instead of receiving that income in your take-home pay (where it would be taxed at your marginal rate), it goes into super and is taxed at a concessional rate of 15%.

This strategy is also known as:

• Pre-tax super contributions
• Concessional contributions
• Voluntary employer contributions

The Pros of Salary Sacrificing Into Super

1. Save on Tax

One of the biggest advantages of salary sacrificing is the tax saving.

• If you earn more than $45,000, your marginal tax rate is at least 32.5%
• Super contributions are only taxed at 15% (or 30% for high-income earners over $250,000)

That’s a potential tax saving of 17.5% or more — just by redirecting income into super instead of your bank account.

2. Grow Your Super Faster

Because more money goes into your fund (and less to the ATO), your super can grow faster — especially with the power of compounding over time.

Even small, regular contributions add up:

• $100/week salary sacrifice = ~$5,200/year
• Over 20 years, with compounding, that could grow to $200,000+ (depending on returns)

3. Boost Retirement Readiness

Salary sacrifice is a great way to catch up on retirement savings — especially if you're in your 40s or 50s and want to close the super gap.

The Cons of Salary Sacrificing

1. You Can’t Access the Money Until You Retire

Once money is contributed to super, it’s locked away until you meet a condition of release — usually retirement after age 60.

2. There Are Contribution Limits

You can only contribute a certain amount of concessional (pre-tax) contributions per year — more on this below. Exceeding the limit can result in extra tax and penalties.

3. You May Already Be Near the Limit With Employer Contributions

From July 1 2025, employers must pay 12% Super Guarantee. If you’re a high-income earner, this may already eat up most of your concessional cap.

You’ll need to check your total contributions before deciding how much to sacrifice.

2025 Super Contribution Limits (Updated)

In the 2025–26 financial year, the concessional contributions cap is:

$30,000 per financial year (up from $27,500 in 2024)

This includes:

• Employer contributions
• Salary sacrifice contributions
• Personal deductible contributions

Anything over this cap will be taxed at your marginal rate, plus an interest charge, so it’s important to track your totals.

Catch-Up Contributions: A Bonus Opportunity

If your total super balance is under $500,000, you may be able to "carry forward" unused concessional caps from the past five years.

This is a huge opportunity to:

• Catch up on missed contributions
• Make a one-off large salary sacrifice or personal contribution
• Save big on tax in high-income years

Example:
You didn’t salary sacrifice for 3 years. You now have $60,000 in unused caps. You could make a large contribution now and potentially reduce your tax significantly.

Is Salary Sacrificing Right for You?

Here’s who typically benefits most:

Best for:

• Mid-to-high income earners ($80k+)
• People wanting to reduce tax and save for retirement
• Business owners with steady income
• Employees over 40 looking to boost super before retirement
• Anyone with unused contribution caps

Not ideal if:

• You’re on a tight budget
• You plan to access the money soon
• You already contribute near the cap through employer SG
• You have insecure employment or variable income

How to Set Up Salary Sacrifice

1. Check your current super contributions
   Use your myGov account linked to the ATO or ask us to confirm how much you’ve contributed so far this financial year.
2. Talk to your employer or payroll team
   You’ll need to submit a written request for salary sacrifice (usually a simple form).
3. Choose the right amount
   Start small if you’re unsure. Even $50–$100 per week can make a big difference over time.
4. Review regularly
   Check annually to make sure you’re staying under the cap and getting the full benefit.

Common Mistakes to Avoid

• Forgetting to track employer contributions and accidentally breaching the cap
• Not documenting the agreement properly with your employer
• Assuming all super contributions are tax-free — only concessional contributions enjoy the 15% rate
• Not seeking advice on how salary sacrifice fits into your overall financial plan

Final Thoughts: Small Sacrifices, Big Future Gains

Salary sacrificing into super can be one of the easiest and most effective ways to grow your wealth and reduce your tax. But like all financial strategies, it works best when it’s tailored to your personal goals and income.

With the 2025 limits increased, there’s more room to contribute and save, especially if you start early and take advantage of catch-up rules.

Need Advice? Let’s Chat.

At Cashflow Financial, we help individuals and business owners across NSW and beyond optimise their super strategies and maximise their financial future.

Whether you're ready to set up a salary sacrifice plan or want to review your full super position, we’re here to help. Book a consultation today.