SMSF Strategy Guide: Online Library

Concessional Contribution Strategies

SMSF Education
Smsf strategy guide: Online library

Salary Sacrifice


Probably the most commonly known strategy around increasing your concessional contributions to your self managed super fund is called salary sacrifice.

Salary sacrifice involves an agreement between you (as the employee) and an employer, where you forego – or sacrifice – a portion of your pre-tax salary which in turn is paid directly into your SMSF.


So why would we sacrifice some of our take home salary and put into our SMSF ?

Because the amount of salary that you have foregone which has been paid to your SMSF is only taxed at a maximum of 15%, instead of your marginal tax rate – which for most working people is much higher than that – if that amount was just taken as regular salary.

So the deal you are entering into that you you pay less tax on that amount of money now in return for it being contributed into your SMSF where you can’t access it until you retire, or attain some other condition of release.

One issue to remember with salary sacrifice is that these amounts count toward the concessional contribution caps. These contribution caps include both salary sacrifice amounts, along with the Super Guarantee amounts that your employer pays to your super fund. In other words, don’t salary sacrifice the entire contribution cap amount, as your employer contributions will tip you over the limit.

For self employed people, the equivalent of salary sacrifice is simply where you make concessional contributions to your SMSF rather than take those amounts as wages.


The last thing you want is to enter into an arrangement that is ineffective. To ensure your salary sacrifice arrangement actually does what you want it to, ensure the following:

  • Make sure that you don’t go over the concessional contribution limit when you combine both your salary sacrifice amounts with the employer SGC contributions.
  • Make sure your salary has been re-negotiated, with your employer agreeing to pay you a reduced salary in lieu of higher SMSF contributions.

Register for our FREE newsletter to receive investment insights, education, and SMSF trustee updates