Salary Sacrifice vs Personal Super Contributions: How to Save on Tax While Growing Your Super
- Grace Elias
- May 2
- 4 min read
Updated: May 12
(Information below is accurate as of 12th May 2025. However, regulations may be subject to change.)
As tax season approaches, one of the most common questions I get as a tax accountant is, “Is there any way to reduce my tax?”
Potentially, yes there is, and one of the most effective ways is by making extra contributions to your superannuation. There are two options available:
Salary Sacrifice
Personal Deductible Contributions
Both can help reduce your taxable income and save you money, and this is how they work.
What Is Salary Sacrifice?
Salary sacrifice is an arrangement where you ask your employer to take a portion of your before-tax salary and pay it directly into your super fund, so instead of having that amount being taxed at your normal income tax rate (which might be 30%, 37% or even 45%), the money is now taxed at just 15% in your super.
Example:
If you earn $100,000 and salary sacrifice $10,000:
Your taxable income is reduced to $90,000,
Tax on the $10,000 is $1,500 in super instead of $3,000 as income tax,
You save around $1,500 in tax,
That leaves you with $8,500 growing in your super for retirement, compared to only $7,000 in your pocket if you had not sacrificed that $10,000.
This example is based on $100,000 taxable income. The higher your tax bracket, the more money you save by doing this.
What If I’ve Already Been Paid?
If you didn’t set up salary sacrifice arrangement earlier in the year, don’t worry, you’ve got another option. You can make a personal contribution to your super fund and claim it as a tax deduction when you lodge your tax return.
This is called a Personal Deductible Contribution. How it works:
Transfer money from your bank account into your super fund,
Lodge a Notice of Intent to Claim a Deduction with your super fund,
Claim the contribution as a deduction on your tax return,
Your contribution is now treated just like salary sacrifice, taxed at 15% in your super, not your normal income tax rate.
The Difference Between Salary Sacrifice and Personal Deductible Contribution
Feature | Salary Sacrifice | Personal Deductible Contribution |
Contribution source | Income before PAYG tax | Income after PAYG tax |
Who organises it | Employer | Yourself |
Paperwork required | No | Yes, you must lodge a "Notice of Intent" |
Timing | Must be set up in advance | Can be done anytime before 30th June |
Tax benefit | Reduces taxable income | Also reduces taxable income |
When Can You Access Super Contributions?
One of the most important thing to understand is: your super is generally locked away until you meet certain conditions, usually related to retirement.
Your preservation age is the age at which you can access your super if you're retired (or start a transition to a retirement income stream), as set out in the table below:
Date of Birth | Access Age (Preservation Age) |
Before 1 July 1960 | 55 |
1 July 1960 – 30 June 1961 | 56 |
1 July 1961 – 30 June 1962 | 57 |
1 July 1962 – 30 June 1963 | 58 |
1 July 1963 – 30 June 1964 | 59 |
After 1 July 1964 | 60 |
Once you reach 65, you can access your super even if you’re still working.
Do You Pay Tax When You Withdraw Super?
If you’re 60 or older and withdrawing from a taxed super fund (which most Australians have), your withdrawals are 100% tax-free.
If you're between preservation age and 60, withdrawals may be partially taxed, but usually at a much lower rate (15% or less).
Things to Watch Out For
Contribution cap: You can only contribute up to $30,000 for the financial year 2024-2025 (this cap includes employer contributions, salary sacrifice, and personal deductible contributions). Additional contributions may incur higher tax rate as per Division 293 tax. Follow up article regarding this cap and Division 293 tax is available on this link: https://wgtaxation.wixsite.com/wgtaxation/post/super-contribution-cap-division-293.
If making a personal contribution, don’t forget to lodge the “Notice of Intent” with your super fund before lodging your tax return.
Contributions must be received by your super fund before 30 June to count for that financial year.
TL;DR
If you’re looking to legally reduce your tax and grow your super at the same time, you can explore these two options: salary sacrifice and personal super contributions.
Use salary sacrifice if you can plan ahead with your employer, or,
Use personal contributions if you’re catching up at tax time
Both offer the same great tax savings and help you build a more comfortable retirement.
Need Help?
Reach out to your tax accountant or financial adviser. We're here to help if needed. Always consult with a qualified professional before making important decisions.
General Advice Disclaimer
The information provided on this website is intended for general informational purposes only and should not be construed as professional advice. The advice and recommendations on this site are not intended to replace individual consultations with a qualified professional.
The application of tax, accounting, and business advice varies depending on personal circumstances, and the laws, rules, and regulations are subject to change. Therefore, readers should not rely solely on the content provided, and should always seek professional guidance tailored to their specific needs before making any decision.
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