For high-income professionals looking to secure their financial future, salary sacrificing into super is a powerful strategy that can lead to significant tax savings and increased retirement savings. However, making the most of super contributions in 2025–26 requires understanding the latest rules and contribution caps.
In this guide, we'll walk through how salary sacrificing works, what the current contribution limits are, and how you can tailor your strategy to take full advantage of these opportunities. Whether you're a peak-earning professional couple or a pre-retiree with spare cash flow, this guide will provide practical insights to boost your super.
Key Takeaways:
How Salary Sacrificing Into Super Works in Australia
In Australia, salary sacrificing into super involves redirecting part of your pre-tax salary into your superannuation fund. This means the amount you contribute is deducted from your taxable income before tax is calculated. As a result, you reduce your income tax liability because the amount you contribute to super is taxed at a concessional rate of just 15%, which is typically lower than your marginal tax rate.
Who Benefits Most From Salary Sacrificing?
Salary sacrificing can be especially beneficial if you're looking to reduce your current tax bill while saving for retirement. However, it’s important to stay within the concessional contributions cap to avoid excess tax penalties. To understand more about the Concessional Contributions Cap, check out the ATO’s guide.
Current Contribution Caps and Key Numbers for 2025–26
Understanding the contribution caps for the 2025–26 financial year is crucial to effectively planning your super contributions. Here’s what you need to know:
For a more detailed explanation and the latest updates, check the Australian Taxation Office’s contribution cap page.
Smart Salary Sacrifice Tactics for Peak-Earning Couples
If you and your partner are both high-income earners, there are several ways you can optimise salary sacrificing to maximise your super contributions and tax benefits. Here are some smart strategies:
By optimising super contribution strategies through salary sacrificing and splitting, you can ensure you’re maximising your retirement savings in the most tax-effective way possible.
Strategies for Pre-Retirees in Their 50s and 60s
For those approaching retirement, salary sacrificing super becomes even more important. The 50s and 60s are a critical time for building retirement savings, and there are several strategies to consider:
Planning for retirement in your 50s and 60s requires a more deliberate approach to retirement planning. By utilising these strategies, you can ensure your retirement savings grow significantly before you exit the workforce.
Worked Scenarios: Small Changes, Large Long-Term Impact
To better illustrate how salary sacrificing super can make a difference, let’s look at a few worked scenarios:
Example 1: Professional Couple - Sarah and Mark
Sarah and Mark are both earning $180,000 each. They decide to salary sacrifice $15,000 into their superannuation. By doing this, they reduce their taxable income to $165,000 each, potentially saving $5,250 in income tax (based on their marginal tax rates).
Example 2: Pre-Retiree - John
John is 59 and has $500,000 in his super fund. He decides to make use of the catch-up concessional contributions and contributes an additional $15,000. This extra contribution helps him take full advantage of his concessional cap, further boosting his retirement savings as he approaches retirement.
These simple strategies lead to large long-term growth in super balances, especially when compounded over many years.
When to Talk to an Adviser Before Changing Your Contributions
Before making significant changes to your super contributions, it’s crucial to talk to a financial planner. A professional can help you navigate complex income situations, multiple entities, and SMSF arrangements to ensure that your contributions are optimised for tax effectiveness and long-term growth.
Ready to Optimise Your Super Contributions?
Understanding how salary sacrificing super in 2025 works is a key step in building your retirement savings. If you’re ready to optimise your super contributions or need help tailoring a strategy to your specific needs, book a contribution strategy session with one of our expert advisers at Navigate Financial.
Request your contribution strategy session now!
General Advice Warning: The information in this article is general in nature and does not take into account your objectives, financial situation or needs. You should consider whether the information is appropriate for your circumstances and seek advice from a licensed financial adviser before acting.
Frequently Asked Questions (FAQs)
1. What is salary sacrificing into super and how does it work?
Salary sacrificing into super is when you choose to have a portion of your pre-tax salary paid directly into your superannuation fund. This reduces your taxable income, potentially lowering your tax bill, as contributions made to super are taxed at a concessional rate of just 15%, which is generally lower than most people's marginal tax rate. This strategy can help boost your retirement savings in a tax-efficient manner.
2. What are the concessional contribution caps for 2025–26?
For the 2025–26 financial year, the concessional contributions cap (before-tax contributions, such as salary sacrifice) is $30,000 per year. If you're over 50, you may also be able to use any unused concessional cap space from the previous five years through catch-up contributions. However, contributions above the cap will be taxed at a higher rate, so it’s important to stay within the limit.
3. How does the "bring-forward" rule work for non-concessional contributions?
The bring-forward rule allows individuals under the age of 67 to make non-concessional contributions that exceed the annual cap of $120,000 by using up to three years’ worth of contributions. This means you can contribute up to $360,000 in one year, with the balance of your cap carried over to the next two years. This is a useful strategy for those with spare liquidity or assets they wish to contribute to super in a single year.
4. What is Division 293 tax and how does it affect high-income earners?
If your income exceeds $250,000 in a financial year, you may be subject to Division 293 tax, which imposes an additional 15% tax on your concessional contributions (superannuation). This means that instead of paying the standard 15% tax on contributions, high-income earners will pay a total of 30%. Being aware of this threshold allows you to adjust your salary sacrifice contributions to avoid extra tax liabilities.
5. How can salary sacrificing benefit pre-retirees?
For pre-retirees in their 50s and 60s, salary sacrificing super offers an excellent opportunity to boost retirement savings before reaching retirement age. You can take advantage of catch-up concessional contributions, contributing extra amounts that were unused in previous years, and downsizer contributions from the sale of property. These strategies help you maximise super contributions and ensure you have a comfortable retirement income.
