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Discover how you could save on tax and help secure your financial future.
23 March 2025
How do you want to spend your retirement? Travelling the world, ticking off bucket-list destinations? Retiring to the coast so you can spend the rest of your life surfing? Or simply enjoying the freedom that financial security brings?
No matter what life you imagine for your future self, making those dreams happen in your golden years requires a little forward planning. That way, you’ll have enough money saved up when you retire to keep living the good life – whatever that means for you.
Salary packaging superannuation could be a tax-effective strategy to lower your annual taxable income while boosting your retirement income. This strategy lets you make additional contributions to your super from your pre-tax salary, helping you grow your retirement savings over time while reducing the amount of tax you pay because your take-home pay is less. Salary packaging super usually suits middle- to high-income earners.
We’ve put together a guide to explain how salary packaging superannuation works, the benefits, some important things to know about salary packaging superannuation, and how to get started.
Salary packaging superannuation, also known as salary sacrificing, means you give up some of your take-home pay to save for your retirement later. It is an arrangement with your employer where you redirect that money as additional super contributions from your pre-tax income. It means you aren’t just relying on your employer’s regular superannuation contributions to save for your future.
When you salary package extra super contributions, your super is usually taxed at a concessional (before tax) rate of 15%, up to a cap of $30,000 each year. This generally makes it more cost-effective than making additional super contributions from your after-tax income. If you go over the $30,000 limit, you will pay extra tax. You may be able to contribute more than $30,000 if you have not contributed the full amount in previous years. If you have more than one super fund, all your contributions are added up and count towards your caps. If you go over these caps, you may need to pay extra tax.
Salary packaging your superannuation is one tool you could use to save for retirement, because it lowers your taxable income while boosting your retirement savings. Think of it as giving your future self a pay rise.
Here’s an example: take a person earning gross $80,000 per year excluding super. By salary packaging an additional superannuation contribution of $5,000 of their pre-tax salary into their superannuation fund, this would reduce their gross annual taxable income to $75,000 per year. The $5,000 before-tax additional super contribution is taxed generally at 15%, compared to their usual income tax rate, leaving more in their super to grow over time.
If you want to learn more about how much you can contribute to super, the contribution caps, and tax, visit the ATO website.
Salary packaging your superannuation isn’t just a smart way to reduce your taxable income – it’s an investment in your long-term financial security. Here are three reasons why salary packaging your super could be worth considering.
Save on tax
Who among us doesn’t want to pay less tax? Salary packaging your superannuation could help you do just that. By making additional super contributions from your pre-tax income, you pay less tax on your super contributions and reduce your taxable income as you will taking home less money, while redirecting money into your retirement savings. It’s a win-win.
Now if salary packaging super isn’t for you, you can also make after-tax contributions from your take-home pay. Plus, if you’re a low-income or middle-income earner, the government could also make a contribution (known as co-contribution) to your super, up to a maximum amount of $500.
Grow your super over time
Paying into your super for a long-off future might not feel like a priority when you’re busy building a career, buying a home, or raising a family.
But the truth is, time is your most powerful ally when it comes to growing your retirement savings. The earlier you start salary packaging your super, the more your money benefits from compound returns. Every little bit extra you can put into your super now will help make a difference in the long run.
It’s important to understand that all investments, including super, inherently carry some level of risk and are subject to volatility. Volatility refers to when returns on your investment increase or decrease over time. The level of volatility associated with a super fund largely depends on the types of assets that it holds. At times, investment markets can experience heightened volatility, leading to negative returns.
Secure your future
No matter how you plan to spend your retirement, having a healthy super balance can turn those dreams into reality. With salary packaging, you can make additional contributions to your super until age 75, giving you plenty of time to build a nest egg that supports your ideal lifestyle when you clock off work for the final time.
Salary packaging super can be a tax-effective strategy and usually suits middle- to high-income earners – it’s a smart strategy to maximise retirement savings and potentially reduce taxable income.
No matter whether you’re a graduate entering the workforce or someone who’s a few years out from retirement, salary packaging your super could benefit you at every stage of your life:
Young professionals: Starting early gives your money more time to grow through compounding returns. Small contributions now could increase your retirement income by thousands in the future.
Mid-career workers: These are often your peak earning years, making it the perfect time to take advantage of salary packaging to potentially reduce tax and grow your retirement savings.
Those nearing retirement: Just because you’re closer to retirement age doesn’t mean you won't benefit from salary packaging. Salary packaging in your final working years can give your retirement savings a boost.
Use Smart’s online calculator to estimate how much you could save through salary packaging superannuation.
Salary packaging superannuation offers great benefits, but there are a few things to consider before getting started:
Affordability: Can you contribute pre-tax income without impacting your current lifestyle? Start with a small amount and adjust as you feel comfortable.
Contribution caps: Stay within the annual concessional contributions cap to avoid paying extra tax.
Retirement goals: Think about how salary packaging fits into your long-term financial plans.
Access: Superannuation is designed for long-term savings and can generally only be accessed when you reach preservation age (currently 60 for most people).
And, of course, we always recommend you talk to a financial advisor before making any financial decisions.
Whether you’re exploring salary packaging for the first time, or wanting to add new benefits, we make it simple. Thanks to our easy-to-use tools and dedicated support team, salary packaging is now simpler than ever.
Step 1: Check your eligibility
Step 2: Explore your benefits
Step 3: Apply now
In just a few simple steps, you can unlock the benefits of salary packaging and take more control of your financial health this year.
Disclaimer: This is general information only. Before entering into any salary packaging or novated leasing arrangement, you should consider your objectives, financial situation and needs, and obtain appropriate legal, tax, financial, or other professional advice based upon your own particular circumstances. This information is current as at April 2025.