Salary Sacrifice Contributions

If you make super contributions under an effective salary sacrifice arrangement, you may be able to increase your superannuation balance by reducing your assessable income for taxation purposes.

Super contributions are not a fringe benefit.

If salary sacrificed super contributions are made to a complying super fund, the sacrificed amount is not considered a fringe benefit for tax purposes.


Your employer will not:

  • be liable to pay fringe benefits tax (FBT) on the super contributions
  • need to include the super contributions as a reportable fringe benefit amount on your payment summary.

Salary sacrificed contributions are treated as employer contributions. If salary sacrificed super contributions are made to a non-complying super fund, the contributions will be a fringe benefit.


Your employer will:

  • be subject to FBT on the sacrificed amount
  • need to record the sacrificed amount on your payment summary as a reportable fringe benefit.

Super contributions are deductible for your employer

If you are under 75 years old, your employer can usually claim a tax deduction on the amount of salary sacrificed contributions they contribute to your super fund on your behalf.


Salary sacrifice reduces your assessable income


The sacrificed component of your total salary package is not your assessable income for taxation purposes. This means that it is not subject to pay as you go (PAYG) withholding tax.

Salary sacrifice is a reportable employer super contribution

As you influence the amount of the extra super contributions your employer makes to your super fund, any salary sacrificed amounts will be reportable employer superannuation contributions. The reportable employer super contribution will be included on your payment summary and will affect the income tests for some tax offsets and deductions, the Medicare levy surcharge, and certain government benefits and obligations.

Super contributions are concessionally taxed in the fund

If you make super contributions through a salary sacrifice agreement, these contributions are taxed in the super fund at a maximum rate of 15%.


Generally, this amount of tax is less than what you would pay if you did not enter into a salary sacrifice agreement and instead were subject to PAYG withholding tax on your earnings.


However, the concessional tax treatment is limited to a set amount of contributions made each income year.


On 1 July 2016, Sally and Zoe started work at Green Thumb Gardening, earning $45,000 a year. Zoe entered into a salary sacrifice arrangement with her employer to sacrifice $10,000 of her earnings into her super fund. Sally did not salary sacrifice any of her salary.


The following table shows the difference between Sally and Zoe’s assessable income and rates of tax at the end of the 2016/2017 income year:

Sally Zoe
Remuneration $45,000 $45,000
Less super salary sacrifice      – $10,000
Assessable income $45,000 $35,000
Deductions      –      –
Taxable income $45,000 $35,000
Income tax (using the 2007–08 tax rate) $6,172 $3,192
Medicare Levy $900 $700
Tax on super sacrificed (15% in the fund)      – $1,500
Total tax and Medicare levy paid $7,072 $5,932