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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:
- Salary sacrificing into super can help reduce your taxable income and take advantage of a lower tax rate (15%) inside the superannuation fund.
- For the 2025–26 financial year, the concessional contributions cap is set at $30,000, and the non-concessional cap is $120,000.
- Smart tactics like splitting contributions or using the bring-forward rule can optimise your super contributions.
- Pre-retirees in their 50s and 60s can utilise catch-up contributions and downsizer contributions to boost their retirement savings.
- Simple changes in your contribution strategy today can have a long-term impact on your retirement outcomes.
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?
- High-Income Professionals: If you’re earning a high income, salary sacrificing allows you to reduce your taxable income and pay less tax overall.
- Peak-Earning Couples: For dual-income households, strategically splitting super contributions can help maximise your tax benefits and boost both partners’ retirement savings.
- Pre-Retirees: For individuals in their 50s and 60s, salary sacrificing offers a chance to significantly increase superannuation balances as they near retirement.
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:
- Concessional Contributions Cap: This is the limit on the total amount of before-tax contributions (such as salary sacrificing) that can be made to your super in a given year. For 2025–26, the concessional contributions cap is $30,000.
- Non-Concessional Contributions Cap: Non-concessional contributions are those made from your after-tax income, and the cap for 2025–26 is set at $120,000.
- Bring-Forward Rule: If you’re under 67, you may be able to bring forward up to three years’ worth of non-concessional contributions. This allows you to contribute more than the cap in one year, with the trade-off of reducing your cap in future years.
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:
- Splitting Contributions: If one partner has a significantly higher income, they can contribute more to their super to reduce the household’s overall tax burden. This can be a highly effective way to balance the contributions between both partners.
- Division 293 Tax Awareness: High-income earners may be subject to Division 293 tax, which increases the effective tax rate on concessional contributions for those earning over $250,000. Being aware of this threshold helps you manage how much to sacrifice into super and avoid extra tax liabilities.
- Debt vs. Contributions Trade-Offs: For couples with significant mortgage debt or other liabilities, weighing the trade-off between paying down debt and contributing to super is key. While reducing debt is important, boosting super contributions can provide long-term retirement benefits that should not be overlooked.
- School Fees Timing: For families with children, planning the timing of your salary sacrificing around major expenses (like school fees) can help ensure you make the most of available cash flow while still contributing effectively to super.
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:
- Catch-Up Concessional Contributions: If you’ve missed out on contributing the maximum amount to your super in previous years, the catch-up concessional contributions rule allows you to make up for these missed contributions, using unused cap amounts from previous years.
- Downsizer Contributions: If you’re selling your home and downsizing, you may be able to contribute up to $300,000 from the sale proceeds into your superannuation (up to $600,000 for a couple), even if you’ve already reached the concessional contribution cap.
- Coordinating with SMSF or Industry Funds: If you’re managing your super via a Self-Managed Super Fund (SMSF) or an industry fund, coordinating your contributions and investment strategy is crucial to ensure you maximise tax benefits while adhering to the contribution caps.
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.
