Salary sacrificing into superannuation is one of the most tax-effective strategies available to employed tradies and director-employees — yet a surprising number of people in the trades industry never use it, or use it incorrectly.

Done right, salary sacrifice can save a qualified tradie thousands of dollars per year in income tax while simultaneously building a bigger retirement nest egg. This guide explains how it works, who can use it, and how to set it up.

What Is Salary Sacrifice into Super?

Salary sacrifice (also called salary packaging) means agreeing with your employer to forgo part of your pre-tax salary in exchange for your employer making additional super contributions on your behalf.

Instead of receiving your full wage and then making personal super contributions from after-tax income, the contribution goes into your super fund directly from your gross (pre-tax) wage.

The tax advantage: Contributions made via salary sacrifice are taxed at 15% inside super — not at your marginal income tax rate. For a tradie earning $90,000, the marginal rate is 32.5% (plus 2% Medicare Levy = 34.5%). Every dollar sacrificed saves the difference between 34.5% and 15% = 19.5 cents per dollar.

How the Tax Saving Works

Let's make it concrete.

Without salary sacrifice:

  • Gross wage: $90,000
  • Income tax (approx.): $20,797
  • Medicare Levy: $1,800
  • Take-home pay: $67,403
  • Super (11.5% employer): $10,350 (paid on top by employer)

With $10,000 salary sacrifice:

  • Gross wage: $90,000
  • Salary sacrifice amount: $10,000
  • Assessable income: $80,000
  • Income tax on $80,000 (approx.): $17,547
  • Medicare Levy: $1,600
  • Take-home pay: $60,853 (lower by $6,550)
  • Contributions tax in super (15% on $10,000): $1,500
  • Net into super from sacrifice: $8,500

Comparison:

  • Take-home pay reduction: $6,550
  • Extra super (after tax in fund): $8,500
  • Tax saved vs taking as wage: $1,950

For every $10,000 you sacrifice, your take-home pay drops by ~$6,550 but your super grows by $8,500. You are effectively "buying" $8,500 of super savings for $6,550 of take-home — a 30% boost.

Who Can Use Salary Sacrifice?

Employed Tradies (Employees)

Any employee can salary sacrifice into super — whether you're an apprentice, qualified tradie, or site supervisor. You arrange this with your employer through a written salary sacrifice agreement.

Employer must agree: Salary sacrifice is not a legal right — it requires your employer's consent. Most modern payroll systems (Xero, MYOB) handle it easily, so most reasonable employers will accommodate the request.

Director-Employees of Their Own Company

If you operate through a company and pay yourself as an employee-director, you can salary sacrifice just like any other employee. The company is your employer; you are the employee. A salary sacrifice agreement is put in place, and the company makes additional super contributions from your gross wage.

This is one of the most effective tax strategies for tradie company owners.

Sole Traders

Sole traders cannot technically salary sacrifice — because there's no employer-employee relationship. However, they can achieve a near-identical outcome by making personal concessional contributions to super and claiming a tax deduction.

The mechanism is different but the tax result is essentially the same. See the section below on personal deductible contributions.

The Concessional Contribution Cap

All concessional contributions — employer super (the 11.5% guarantee), salary sacrifice, and personal deductible contributions — must stay under the $30,000 per year cap (2025–26 financial year).

If you exceed this cap, the excess is included in your assessable income and taxed at your marginal rate, with an interest charge. The 15% tax paid on contributions is refunded as a tax offset, so you effectively pay your marginal rate on the excess.

Planning your sacrifice:

Your employer is already contributing 11.5% mandatory super. If you earn $80,000:

  • Mandatory employer super: $9,200
  • Cap remaining for salary sacrifice: $30,000 − $9,200 = $20,800

You can sacrifice up to $20,800 additionally without breaching the cap.

Catch-Up Concessional Contributions

If your super balance is below $500,000, you can carry forward unused concessional cap amounts from the previous five years and make a larger contribution in a good income year.

This is particularly powerful for tradies who:

  • Had years of low income or low super contributions
  • Are self-employed and didn't contribute consistently
  • Had a high-earning year (big contract, business sale proceeds, large project bonus)

Example: Sarah is 44 with a super balance of $180,000. Over the past 3 years, she used only $20,000 of her $30,000 annual cap — leaving $10,000 unused per year = $30,000 in carry-forward capacity.

In a high-income year, she can contribute up to $30,000 (current year) + $30,000 (carry-forward) = $60,000 in concessional contributions, all taxed at 15% instead of her 39% marginal rate. Tax saving: ($60,000 × 39%) − ($60,000 × 15%) = $14,400.

Setting Up Salary Sacrifice: Step-by-Step

For Employees

Step 1: Talk to your employer or HR. Explain you want to salary sacrifice into super.

Step 2: Ensure your employer's chosen super fund (or your nominated fund) can receive salary sacrifice contributions separately from the employer guarantee contributions. Most can.

Step 3: Sign a written salary sacrifice agreement specifying:

  • The amount you're sacrificing (can be a fixed dollar amount or percentage)
  • That the sacrifice reduces your ordinary time earnings for super guarantee purposes (or doesn't — this matters for your mandatory super calculation)
  • The start date

Step 4: Your employer updates payroll. The sacrifice amount is deducted from your gross wage before tax, and sent to your super fund as an employer contribution.

Step 5: Review annually. Adjust the sacrifice amount if your income changes, or if you want to maximise the catch-up provisions.

For Director-Employees

Step 1: Draft a salary sacrifice agreement between you (as employee) and your company (as employer). Your accountant can prepare this — it's a simple document.

Step 2: Update your company's payroll (Xero, MYOB) to reflect the sacrifice arrangement.

Step 3: Ensure the contributions are labelled as employer (sacrificed) contributions when sent to the super fund — not as personal contributions.

Step 4: Report correctly via Single Touch Payroll (STP). Your payroll software handles this automatically if set up correctly.

Sole Trader Alternative: Personal Deductible Contributions

If you're a sole trader, the process is slightly different but achieves the same tax outcome.

Step 1: Make a personal contribution to your super fund from your personal bank account (after-tax money).

Step 2: Before lodging your tax return, lodge a Notice of Intent to Claim a Deduction (Section 290-170 notice) with your super fund.

Step 3: Claim the contribution as a deduction in your tax return.

The tax outcome: You made the contribution with after-tax money, but you claim a deduction — meaning the income is effectively taxed at 15% in super rather than your marginal rate. Same as salary sacrifice for employees.

Important: The super fund will tax the contribution at 15% (contributions tax). If you've already paid income tax on the money before contributing, you receive a refund of the difference via your tax return.

Deadline: You must lodge the Notice of Intent with your super fund before:

  • Lodging your tax return for that year, OR
  • The end of the following financial year (30 June the year after)

Missing this deadline means you cannot claim the deduction.

What Not to Sacrifice: The Take-Home Pay Floor

There's a practical limit on how much you should sacrifice — your take-home pay needs to cover living expenses. Salary sacrificing $40,000 is meaningless if you can't pay rent.

A simple budgeting approach:

  1. Calculate your essential monthly costs (rent/mortgage, groceries, utilities, fuel, loan repayments)
  2. Calculate your current net take-home pay after tax
  3. The difference is your "sacrificeable buffer" — what you can redirect to super without lifestyle impact

Many tradies find $5,000–$15,000 per year is comfortably sacrificeable without touching their lifestyle.

Salary Sacrifice and the Superannuation Guarantee

A common question: does salary sacrifice reduce the super guarantee your employer is required to pay?

Under rules in place since 1 January 2020, salary sacrifice cannot reduce your super guarantee entitlement. Your employer must still pay 11.5% on your ordinary time earnings, calculated as if the sacrifice hadn't happened.

Example: You earn $90,000 and salary sacrifice $10,000. Your employer cannot base the 11.5% guarantee on $80,000 (the sacrificed wage). They must calculate on the full $90,000.

Check your salary sacrifice agreement wording. Some older agreements pre-2020 may still be drafted incorrectly. Update them if needed.

Tax Offsets and Low Income

For tradies earning under $37,000, the Low Income Superannuation Tax Offset (LISTO) effectively refunds the 15% contributions tax on up to $500 of super contributions. This means apprentices and low-income workers effectively pay 0% contributions tax — making salary sacrifice even more attractive at the lower end.

For tradies earning $37,000–$52,697, the Super Co-Contribution scheme applies. If you make personal after-tax contributions to super, the government adds up to $500 matching. This is separate from salary sacrifice and applies to non-concessional contributions.

Comparison: Tax on $10,000 at Different Marginal Rates

  • Under $18,200 — 0% (+ 2% Medicare on some) — $0 — $1,500 — -$1,500 (worse off)
  • $18,201–$45,000 — 21% — $2,100 — $1,500 — $600
  • $45,001–$120,000 — 34.5% — $3,450 — $1,500 — $1,950
  • $120,001–$180,000 — 41.5% — $4,150 — $1,500 — $2,650
  • Over $180,000 — 49% — $4,900 — $1,500 — $3,400

Note: At very low incomes, salary sacrifice can work against you (the 15% contributions tax exceeds your marginal rate). For most qualified tradies earning $60,000+, it's clearly beneficial.

Accessing Sacrificed Super

Salary sacrificed super is locked away in your super fund until you meet a condition of release — primarily reaching preservation age (60 for most tradies) and retiring, or turning 65 regardless of work status.

You cannot access it early for:

  • Business cash flow emergencies
  • Home deposits (except through the First Home Super Saver Scheme, capped at $50,000)
  • Personal hardship (unless genuine financial hardship conditions are met)

This illiquidity is the trade-off for the tax advantage. Ensure you're not sacrificing money you'll need in the next 10–15 years.

Frequently Asked Questions

Q: Can I salary sacrifice if I'm only working part-time?
Yes. Part-time employees can salary sacrifice. The cap is the same ($30,000 minus your employer guarantee contributions). On lower income, the tax saving is smaller — but still positive if your marginal rate exceeds 15%.

Q: My employer is reluctant to set up salary sacrifice — what can I do?
Salary sacrifice requires employer cooperation. Many small trade employers simply don't know how to set it up. Show your employer this guide or refer them to the ATO's guidance. In Xero and MYOB, salary sacrifice is a standard payroll feature that takes minutes to configure.

Q: Does salary sacrifice affect my income for child support or Centrelink?
Salary sacrifice can reduce your "adjusted taxable income" used for some Centrelink assessments. For child support purposes, the ATO's child support income test may include notional salary sacrifice amounts. Get advice specific to your situation if child support or Centrelink is relevant.

Q: Can I sacrifice into any super fund?
Yes, as long as your employer can make contributions to your chosen fund. Since the introduction of "super choice," you can nominate your preferred fund. Your employer's clearing house or payroll software handles the payment.