How Salary Sacrifice Actually Saves Tax
When you salary sacrifice into super, that amount is taken from your pay before income tax is calculated — reducing your taxable income. Instead of being taxed at your marginal rate (up to 45%), it's taxed at just 15% inside your super fund. For anyone on a marginal rate above 15%, that gap is where the savings come from.
Don't Forget the Medicare Levy Saving
Most salary sacrifice explanations only calculate the income tax saving — but since sacrificing reduces your taxable income, it also reduces the 2% Medicare Levy calculated on that lower amount. This calculator includes that saving, which many simpler tools miss.
The Concessional Contributions Cap
The cap for 2025-26 is $30,000 per year — and critically, this cap includes everything going into your super at the concessional (pre-tax) rate, not just your salary sacrifice amount. That means your employer's Super Guarantee contributions count toward the same cap.
| Item | Amount |
|---|---|
| Employer SG (12% of $90,000) | $10,800 |
| Room remaining under $30,000 cap | $19,200 |
If you sacrifice more than the remaining room, the excess loses its tax advantage — it's added back to your assessable income and taxed at your marginal rate, plus an excess contributions charge.
Division 293 Tax — A Catch for High Earners
If your combined income and concessional contributions exceed $250,000, an additional 15% Division 293 tax applies to contributions above that threshold — on top of the standard 15% contributions tax, effectively making the rate 30% for the affected portion. This calculator doesn't apply Division 293 automatically; factor it in manually if your income is in this range.
Worked Example
| Item | Amount |
|---|---|
| Taxable income | $90,000 |
| Salary sacrifice | $10,000 |
| Income tax saved | $3,000 |
| Medicare Levy saved (2%) | $200 |
| Contributions tax in super (15%) | − $1,500 |
| Net tax benefit | $1,700 |
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Frequently Asked Questions
Doesn't apply Division 293 tax automatically for high earners. Verify your specific cap usage and eligibility with your super fund or a financial advisor.