
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"

Buying an investment property in Australia can be one of the most powerful and reliable ways to **build long-term wealth** — but it’s not as simple as picking a suburb and signing on the dotted line. You need to navigate complex tax implications, stringent bank borrowing criteria, and real-world cashflow considerations.

This practical guide cuts through the jargon and explains each crucial step in plain English. We’ll cover everything from how to fund the deposit and understanding rental income, to the mechanics of tax deductions and how **negative gearing** actually works.

Ready to see the real-world impact of the numbers? Use our **[Investment Property Calculator](/calculators/investment-property)** to instantly model rental income, expenses, loan costs, depreciation, and your long-term equity growth potential.

---

## Table of contents

1. [Why investment property works](#how-investment-property-builds-wealth)  
2. [Funding your deposit: cash vs leveraging equity](#how-to-fund-the-deposit-cash-vs-equity)  
3. [The investment property buying process](#understanding-the-buying-process)  
4. [Rental income: What’s taxable?](#rental-income-and-how-it-is-taxed)  
5. [Claiming expenses: What's tax-deductible?](#what-expenses-are-tax-deductible)  
6. [Depreciation and capital works explained](#depreciation-and-capital-works)  
7. [Negative gearing vs positive cashflow](#negative-gearing-vs-positive-cashflow)  
8. [Capital growth and CGT on sale](#capital-growth-and-cgt)  
9. [FAQs](#faq)  
10. [A Note on Advice (Disclaimer)](#disclaimer)

---

## Why investment property works

Property investing is fundamentally a two-pronged strategy for building wealth:

**1. Capital Growth** — This is the long-term appreciation in the property's value. As the value climbs, so does your equity.  
**2. Rental Income** — The rent collected from tenants helps offset or completely cover your loan repayments and running costs.

The key mechanism is **leverage**. Unlike shares, where you use cash, property lets you borrow a significant portion of the asset's value. This means you can control a much larger asset with a relatively small amount of capital.

> **Example:** You invest **$100,000** as a deposit and borrow **$400,000** to buy a $500,000 property. If the property value grows by a modest 6% in one year (a $30,000 gain), that represents a **30% return on your $100,000 equity** — before you even factor in the rental income.

The ability to claim tax deductions on interest and property costs is what truly separates an investment property from your own home.

---

## Funding your deposit: cash vs leveraging equity

When buying an investment property, you’ll usually need a minimum of **20% deposit** to bypass the cost of Lenders Mortgage Insurance (LMI). However, many banks will lend with a deposit as low as **10% or even 5%**, provided you are willing to pay the LMI premium.

### Option 1: Using your cash savings
This is the most straightforward approach, mirroring the process of buying your own home. Your savings cover:

* The required deposit (5%–20%)
* Stamp duty (a major upfront cost)
* Legal/conveyancing fees
* Building & pest inspections
* Settlement adjustments (council rates, water, etc.)

### Option 2: Tapping into your home equity

If you already own a home, you have a powerful tool at your disposal: **borrowing your deposit using the equity you’ve already built up.**

**The Usable Equity Formula:**

(Home Value × 80%) − Outstanding Mortgage = Available Equity

**Example:**
* Home value: $800,000  
* Outstanding Mortgage: $400,000  
* 80% of Home Value: $640,000  
* **Usable Equity:** $240,000

This $240,000 is potentially available to fund the deposit (or even the entire purchase) of your investment property.

> **Crucial Tip:** When extracting equity, it’s best practice to use a separate loan account (known as a split facility). This clearly separates your deductible investment debt from your non-deductible home loan debt, making tax time far simpler.

---

### Key differences in funding approaches

| Funding Approach | Best For | Notes |
|------------------|----------|-------|
| Equity Loan (Split Facility) | Established homeowners, long-term investors | Interest is clearly tax-deductible, ideal for leveraging |
| HELOC / Line of Credit | Investors needing flexible access for renovations or deposits | Higher interest rates, generally variable, can tempt overspending |
| Cash Deposit | First-time property investors | Simple to execute, but means slower entry into the market |

See how different debt structures affect your costs and tax position using the **[Investment Property Calculator](/calculators/investment-property)**.

---

## The investment property buying process

Buying an investment property follows the same fundamental steps as buying an owner-occupied home, but the decision-making criteria are different.

### Your steps to ownership

1. **Secure Finance Pre-Approval**  
   Knowing your precise borrowing limit before you start looking is essential for setting a realistic budget and moving quickly.

2. **Targeted Property Selection**  
   - Your focus shifts from "where I want to live" to "**where tenants want to live**."  
   - Research vacancy rates, median rents, planned infrastructure, and demographic trends.  
   - Prioritise suburbs with proven tenant demand.

3. **Offer and Contract**  
   - Work closely with your solicitor or conveyancer from the moment your offer is accepted (or before an auction).

4. **Cooling Off (Where Applicable)**  
   A cooling-off period (usually 5 business days, but varies by state) is not available if you buy at auction.

5. **Settlement**  
   The final transfer of ownership, typically occurring 30–90 days after the contract is signed.

### Typical Upfront Costs (The Fine Print)

| Expense | Approximate Cost | Note |
|---------|------------------|------|
| Stamp duty | 3–6% of property value (highly variable by state) | **Not deductible** but adds to your cost base. |
| LMI (if deposit is under 20%) | 1–4% of loan amount | Can often be added to the loan amount. |
| Conveyancing/legal | $1,500–$2,500 | Necessary for due diligence. |
| Building & pest inspection | $400–$800 | Critical for avoiding expensive surprises. |
| Valuation fees | $300–$600 | Often charged by the lender. |

---

## Rental income: What’s taxable?

The rent you receive is added to your **taxable income** for the financial year. This includes more than just the monthly rent payment:

* Rent received or due
* Any money the tenant reimburses you for (e.g., utility charges)
* Insurance payouts for lost rent
* Any property-related government grants

**The good news? Rental income is taxed at your marginal rate, but only *after* you have deducted all eligible expenses.**

> If your total deductible expenses (including interest and depreciation) are greater than your rental income, you have a **rental loss**. This is the basis of **negative gearing**, where the loss reduces your overall income tax bill.

---

## Claiming expenses: What's tax-deductible?

You can claim a deduction for almost any expense that is **incurred to generate rental income** and is *not* a capital improvement.

### Ongoing Expenses (Claimed in the year you pay them)

* **Mortgage interest** (the single biggest deduction for most investors)  
* Council rates, water rates, and land tax  
* Landlord insurance and building insurance  
* Property management fees  
* Repairs & maintenance (like fixing a leaky tap)  
* Accounting, legal, and some travel expenses (subject to strict rules)  
* Advertising costs to find a new tenant  
* Depreciation (covered next)  

> **Remember:** Loan **interest** is deductible, but the repayment of the loan **principal** is not.

### Non-Deductible or Capital Costs

| Cost | Tax Treatment | Why it's not a direct deduction |
|------|---------------|--------------------------------|
| Stamp duty | Part of cost base for CGT | It’s considered a cost of *acquiring* the asset. |
| Loan principal repayment | Not deductible | This is paying down debt, not an expense. |
| Renovations and Improvements | Added to cost base or depreciated | These improve the property’s value, they are not simple repairs. |
| Buyer’s agent fees | Capital cost (added to cost base) | Like stamp duty, it's a cost of acquisition. |

---

## Depreciation and capital works explained

Depreciation is a non-cash deduction that allows you to claim the cost of the property's structure and fittings over time, even though you didn't physically spend money on it that year. It's often overlooked but can dramatically improve cashflow.

There are two main categories:

### 1. Capital Works Deduction (Division 43)

This covers the cost of the building’s structure (the roof, walls, foundations, integral plumbing).  
You can typically claim **2.5% of the construction cost per year for 40 years** on residential properties built after 1987.

### 2. Plant and Equipment (Division 40)

This covers the easily removable or mechanical assets within the property, such as carpets, ovens, dishwashers, blinds, and air conditioners.  
These are depreciated over their specific effective life (which can be as short as a few years).

> **To maximise your claims** — especially on newer properties — it is highly recommended to engage a Quantity Surveyor to prepare a detailed **Depreciation Schedule**.

---

## Negative gearing vs positive cashflow

These two terms describe the result of your property’s annual operating budget.

### The Mechanics of Negative Gearing

This occurs when your total **deductible expenses (most notably loan interest)** are greater than the rental income you receive. You operate at a cashflow loss for the year, but that loss is tax-deductible against your other income (e.g., salary).

**Example:**

| Description | Amount |
|-------------|--------|
| Rental income | $28,000 |
| Total expenses | $33,000 |
| **Net Loss (deductible)** | **$5,000** |

If you are on a 37% tax rate, this $5,000 loss reduces your income tax payable by $1,850.

> **Crucial Reality Check:** You are still losing $5,000 cash, offset by a $1,850 tax return. The overall net cash loss is $3,150. **Negative gearing is only profitable if the capital growth of the asset outweighs this cash loss.**

---

### What is Positive Cashflow?

This is the opposite: your rental income exceeds all costs, creating surplus cash. You pay tax on this net profit, but you are earning money month-to-month.

**Both strategies are valid**, but suit different goals:

| Strategy | Pros | Cons |
|----------|------|------|
| **Negative Gearing** | Highest capital growth potential, significant tax benefit | Real cash loss to the investor, vulnerable to interest rate rises |
| **Positive Cashflow** | Immediate income generation, lower personal cash risk | Often lower growth potential (or higher purchase price) to achieve positive cashflow |

You can model the cashflow and tax implications of any property using the **[Investment Property Calculator](/calculators/investment-property)**.

---

## Capital growth and CGT on sale

The goal of long-term property investment is typically capital growth. This growth is only taxed when you finally sell the property — this is the **Capital Gains Tax (CGT)** event.

### Key CGT Rules for Individuals

* **Held for less than 12 months:** The *full* capital gain is added to your taxable income.
* **Held for more than 12 months:** You are eligible for the **50% CGT discount**. Only half of the capital gain is added to your taxable income.
* **The Cost Base:** When calculating your final gain, you can reduce the profit by including all associated purchase costs (stamp duty, agent fees, conveyancing) and the cost of any significant renovations.

### The Power of Compounding

Because you only pay CGT **when you sell**, the returns can compound year after year without being eroded by annual tax. This is a major advantage of property investment.

---

Ready to test different scenarios? Want to compare the returns from a negative gearing strategy versus a positive cashflow one?  
Dive into the data with the **[Investment Property Calculator](/calculators/investment-property)**.

---

## FAQ

**Is rental income considered taxable?**  
Yes. After deducting all eligible expenses, any remaining rental profit is added to your personal taxable income.

**Can I claim interest on the loan used for the deposit?**  
Absolutely — provided the borrowed funds were used directly to purchase or maintain the investment property. This is why a split loan structure is highly recommended.

**Is stamp duty tax deductible?**  
No — it's not deductible in the year you pay it. However, it's added to the property’s cost base, which reduces the capital gain when you eventually sell.

**Can I claim depreciation on older properties?**  
Yes. You can usually still claim the Capital Works Deduction (Division 43) for the building structure. However, claims for Plant & Equipment (Division 40) are generally limited for second-hand residential properties.

---

## A Note on Advice (Disclaimer)

This article contains general information about property investment and tax in Australia. **It does not take into account your personal financial situation, goals, or needs.** You should not rely on this as personal financial, legal, or tax advice. Always seek specific advice from a licensed financial advisor, mortgage broker, or tax professional before making any investment decisions.

---

A step-by-step guide for Australians on buying an investment property — from funding the deposit to understanding income, expenses, tax deductions and capital growth.

Buying an Investment Property in Australia: From Deposit to Tax Benefits


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.

#tax

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

Buying an Investment Property in Australia: From Deposit to Tax Benefits

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