Salary sacrificing super: how it affects your weekly pay packet and tax

Understanding salary sacrificing super

Salary sacrificing super is an arrangement where you agree to reduce your pre-tax salary in exchange for your employer making additional superannuation contributions on your behalf. This can be a tax-effective way to boost your retirement savings, but it also reduces your immediate take-home pay. It is important to understand how this interacts with the legal minimum wage, award rates, and the super guarantee.

The pay floor: national minimum wage and award rates

The Fair Work Commission sets the national minimum wage each year. From 1 July 2026, the adult national minimum wage is $26.44 per hour or $1,004.90 per week for a 38-hour week. This is the minimum an award-free employee can be paid before tax. If you are covered by a modern award, the award rate applies instead, and it may be higher. Some awards have introductory rates that are lower for the first six months, but they cannot fall below $25.74 per hour or $978.10 per week. Junior, apprentice, trainee, and supported wage rates are also lower than the adult minimum.

Salary sacrificing cannot reduce your pay below these minimums. Your ordinary time earnings (the amount on which your super guarantee is calculated) must be at least the minimum wage or award rate. You cannot salary sacrifice to the point where your cash salary falls below the legal minimum.

How salary sacrificing affects tax and super

When you salary sacrifice, the sacrificed amount is treated as an employer super contribution. It is not included in your assessable income for income tax purposes, so you pay less PAYG withholding. However, the contribution is taxed at 15% inside your super fund (up to the concessional cap). For most employees, this is lower than their marginal tax rate, resulting in a tax saving.

From 1 July 2026, the super guarantee rate is 12% of your ordinary time earnings. Your employer must pay this on top of your salary, regardless of any salary sacrifice arrangement. The maximum earnings on which super guarantee is required is $270,830 per year (the maximum contribution base). The general concessional contributions cap for 2026-27 is $32,500. This cap includes both the compulsory super guarantee and any salary sacrifice contributions. If you exceed the cap, the excess is taxed at your marginal rate plus an interest charge.

Award rates and enterprise agreements

If you are covered by a modern award or an enterprise agreement, your minimum pay rate is set by that instrument. The award or agreement may also contain rules about salary sacrificing. For example, some awards require that salary sacrifice arrangements be in writing and that the employee's base rate of pay remains at least the award minimum. Always check your award or agreement before entering a salary sacrifice arrangement. The Fair Work Ombudsman provides guidance on pay and conditions, including salary sacrificing.

Practical example: weekly pay packet with salary sacrifice

Consider an award-free employee earning the national minimum wage of $1,004.90 per week. If they salary sacrifice $100 per week into super, their taxable salary becomes $904.90. The employer still pays 12% super guarantee on the original $1,004.90 ($120.59), plus the $100 salary sacrifice contribution, for a total super contribution of $220.59 per week. The employee's take-home pay is reduced because less tax is withheld, but the net effect depends on their marginal tax rate and the low income tax offset. Medicare levy of 2% applies once annual income exceeds $30,000. This example is illustrative only; actual outcomes vary.

For more details on which minimum wage applies to you, see our Which minimum wage applies guide. To understand how these figures are calculated, visit How the figures work.

For the published floors, see the rate tables and how the figures work.