
Salary sacrificing into super can reduce your income tax today while boosting your retirement balance. This guide explains how it works, key limits, and how to model your numbers using our [Salary Sacrifice Calculator](/calculators/salary-sacrifice).

## Quick recap: how salary sacrifice works
- You ask your employer to redirect part of your pre-tax pay into super.
- Those contributions are generally taxed at 15% in super (or 30% if Div 293 applies).
- Your taxable income falls by the sacrificed amount, which can lower income tax and Medicare levy.
- Contributions count toward the concessional cap (employer SG + salary sacrifice).

## Key numbers to know
- **General concessional cap:** $30,000 per financial year (includes employer SG and salary sacrifice).
- **Contributions tax:** 15% (or 30% if your income for Div 293 exceeds $250,000).
- **Medicare levy surcharge (MLS):** still based on your taxable income after sacrifice.
- **Preservation:** money in super is locked until you meet a condition of release.

## Pros and trade-offs
**Pros**
- Lower taxable income and potentially lower tax.
- More going into super at a concessional rate.
- Automated, "set and forget" saving.

**Trade-offs**
- Reduced take-home pay now.
- Contributions are preserved until retirement conditions are met.
- Caps apply; excess contributions can be clawed back.

## How to size your sacrifice
1) Find your employer's SG amount (pay slip or HR).  
2) Subtract SG from the $30k concessional cap to see headroom.  
3) Decide how much you can give up in take-home pay.  
4) Check MLS and Div 293 thresholds if relevant.  
5) Model it with our [Salary Sacrifice Calculator](/calculators/salary-sacrifice).

## Model your numbers
Use the calculator to see:
- Change in take-home pay per pay period.
- Extra going into super after contributions tax.
- Projected super balance over your chosen timeframe.

Use the [Salary Sacrifice Calculator](/calculators/salary-sacrifice) to plug in your pay, frequency, and sacrifice amount.

## Common pitfalls to avoid
- **Exceeding the cap:** Include employer SG when calculating headroom.
- **Forgetting Div 293:** If income + reportable contributions exceed $250k, contributions tax can lift to 30%.
- **Cashflow shock:** Start small (e.g., $50-$100 per pay) and scale up.
- **Missing review:** Revisit each July or after pay rises/bonuses.

## Frequently asked questions
**Does salary sacrifice affect my HELP repayment?**  
Yes. HELP is based on your "repayment income," which adds reportable super contributions back.

**Can I stop or change the amount?**  
Usually yes - ask payroll. Many employers let you adjust each pay cycle.

**What if I'm close to retirement?**  
Salary sacrifice can still help; just watch the cap and ensure contributions hit before 30 June.

## Next steps
- Decide a trial amount you can spare from take-home pay.
- Confirm employer SG and cap headroom.
- Run your numbers with the [Salary Sacrifice Calculator](/calculators/salary-sacrifice).
- Set a reminder to review each financial year.

Happy sacrificing - and enjoy the tax win today while boosting tomorrow's balance.


Salary Sacrifice Into Super: How It Works (With Calculator)


import Link from "next/link"

The key to reducing your income tax is to maximise your deductions and manage your reportable income. Did you know that you 

Want to see how much tax you could save? Use the **[Income Tax Calculator](/calculators/tax-calculator)** and model salary sacrifice, deductions and work-from-home hours.

## How to pay less tax in Australia (legally)

The wealthy have made reducing their tax an art form. While we all need to contribute our fair share, **the ATO only expects you to pay the tax you're legally required to pay — nothing more**.

This guide walks through a number of strategies that Australians use to minimise tax, boosting long-term wealth, and keeping more of what they earn. 

---

## Table of contents
1. [Salary sacrifice to super](#salary-sacrifice-to-super)
2. [Work-related deductions & work from home](#work-related-deductions--work-from-home)
3. [Investment deductions & negative gearing](#investment-deductions--negative-gearing)
4. [Offsets & levies](#offsets--levies)
5. [Structuring & timing strategies](#structuring--timing-strategies)
6. [FAQ](#faq)
7. [Disclaimer](#disclaimer)

---

## Salary sacrifice to super

Salary sacrifice means directing part of your pre-tax income into super. It reduces your **taxable income**, and the contribution is taxed at **15% inside super** (instead of your marginal rate, which may be 32%, 37% or 47% incl. Medicare).

To establish a salary sacrifice strategy, you need to ask your employer to direct a portion of your pre-tax salary directly into your super fund.
For example, lets say you earn $100,000 per year and have a surplus income of $200 per fortnight that you'd like to invest.
Your marginal tax rate is 32% including Medicare Levy. That means you could ask your employer to salary sacrifice
$294 per fortnight into your super fund, which will reduce your take home pay by $200 per fortnight after tax ($294 less 32% tax = $200).

> **Key limit:** The concessional cap is **$30,000 per year** (from 1 July 2024), including employer SG and any salary-sacrificed amounts.

**Why it works**

- Reduces taxable income now  
- Your super gets more money invested for retirement  
- Tax rate on contributions is lower than your marginal rate  
- Immediate tax saving equal to your marginal tax rate less 15%

**But… take-home pay drops**

Salary sacrifice improves your net financial position, but does **not** increase take-home cash. Instead:

- Your take-home pay reduces (because you're diverting income into super)
- Your super balance increases, and the tax savings end up in your super fund
- Over time, compounding inside super amplifies the benefits

**When it makes sense**

- You're in a higher tax bracket (greater than $45,000 taxable income) 
- You can comfortably reduce take-home pay (you have surplus income)
- You're saving for long-term retirement goals

**When to be cautious**

- If cashflow is tight, or you might need the money before retirement
- Or you are already close to the concessional contribution cap

If you are self employed, you can still make use of this strategy by making a tax-deductible contribution to super.

---

## Work-related deductions & work from home

Most office workers now have a regular schedule of work from home days. 
To allow for the additional costs incurred when working from home, the ATO allows you to claim a deduction for home office expenses.
You can also claim deductions for other expenses incurred which relate to your work.

### What you can claim

To claim a deduction, an expense must:

- Be **directly related to earning income**
- Be paid by you (not reimbursed)
- Be properly **apportioned** if partly private use

Common deductions include:

- Professional memberships & union fees  
- Tools & equipment (depreciated if >$300)  
- Work-related training relevant to your role  
- Protective clothing  
- Income protection insurance that is paid personally

### Work-from-home (WFH) deductions

ATO’s fixed rate applies per hour worked from home. If you have specific receipts, you could choose the actual expenses method.
The method chosen will depend on which is more favourable to you. Keep:

- Records of hours worked
- Supporting receipts if also claiming specific items

Use a logbook, timesheet, or digital work records. 
In the 2025-26 financial year, the ATO allows you to claim $0.70 per hour for the fixed rate method.
For example, working from home 2 days per week for 48 weeks a year, is 730 hours in claimable expenses.

> Claiming WFH hours doesn't put cash in your pocket immediately — it reduces your taxable income, lowering your final tax bill.

---

## Investment deductions & negative gearing

The ATO allows you to claim expenses relating to your investments. 
If your expenses are greater than the income earned from your investments, that results in a tax loss, which reduces your taxable income.

Learn more about borrowing to invest with our **[Debt Recycling Calculator](/calculators/debt-recycling)**

### Investment deductions

If you invest, you may deduct:

- Loan interest for borrowings used to purchase income producing investments  
- Management fees & platform fees  
- Accounting costs related to investment income  
- Brokerage fees (capital cost base treatment may apply)  
- Research subscriptions
- Software and subscriptions used to manage your investments  

### Negative gearing

If expenses & interest exceed investment income, the loss can be claimed on your personal taxes.
This is negative gearing.

Good to know:

- Helps reduce tax, but you are still making an overall loss. You are 'spending a dollar to get 32 cents back'
- Should be a byproduct of a sound investment strategy, not the main reason for an investment
- Interest rate rises can affect your investment strategy

---

## Offsets & levies

A tax offset reduces the amount of tax you owe. This is different to a tax deduction which lowers your taxable income.

### LITO (Low Income Tax Offset)
Available for incomes generally up to **$66,667**, reducing tax for lower-income earners.

### SAPTO (Seniors & Pensioners Tax Offset)
Significant relief for eligible retirees based on thresholds and tapering rules.

### Medicare Levy & MLS
- Medicare levy: generally 2% of taxable income
- Medicare Levy Surcharge (MLS): 1%–1.5% if income exceeds thresholds and no private hospital cover

>Private hospital cover may cost less than the MLS for higher earners. 
Get quotes for the minimum level of Private hospital cover if you earn over the MLS income levels.

---

## Structuring & timing strategies

Holding the right assets in the right structure can signifcantly reduce tax liabilities, especially for high income earners.
Holding assets in trusts can divert income to lower income earners, or investing via superannuation can reduce earnings tax to 15%.

Timing the receipt of capital gains for low income years can help to minimise tax.

- **Bring forward deductions** if this year’s income is higher  
- **Defer income** where appropriate (realsing a capital gain in a low income year)
- Hold assets **>12 months** for the CGT 50% discount  
- Consider whether holding assets in **super**, **personal names**, or a **company/trust** is appropriate (seek professional advice)

---

Ready to run your own numbers? Try the **[Income Tax Calculator](/calculators/tax-calculator)** and see how salary sacrifice, deductions and work-from-home hours affect your tax.

---

## FAQ

**Does salary sacrifice increase take-home pay?**  
No — it reduces take-home cash but can **improve overall after-tax wealth** by lowering tax and growing super.

**Can I claim work clothes?**  
Only **occupation-specific** or protective clothing. Not everyday clothing.

**Are charitable donations deductible?**  
Yes, if made to **DGR-registered charities** and you receive no material benefit.

**Is negative gearing a tax strategy?**  
It's an **investment strategy with tax consequences**, not a tax trick.

---

## Disclaimer

Tax rules change and everyone's situation is different. This article is **general information only** and does not constitute financial or tax advice. 
Consult a qualified tax adviser to understand your specific circumstances.

---


A plain-English, legally sound guide to reducing your Australian income tax through deductions, salary sacrifice, investing, franking credits, and offsets.

#salary sacrifice

Salary Sacrifice Into Super: How It Works (With Calculator)

How to Pay Less Tax in Australia: A Practical Guide for 2025