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How salary sacrifice super works across Australian states and industries
Understand salary sacrifice super in Australia: how it reduces taxable income, and how state and industry differences affect its use. Explained with the Salary Index.
Salary sacrifice super is a strategy to redirect pre-tax salary into superannuation, not a pay figure, so it has no direct Salary Index value. However, it is more common in higher-paying states and industries.
What is salary sacrifice super?
Salary sacrifice super is an arrangement where you agree to give up part of your pre-tax salary in exchange for your employer making additional superannuation contributions on your behalf. The sacrificed amount goes into your super fund, and you pay less income tax and Medicare levy because your taxable income is lower. This strategy is popular among Australians who want to boost their retirement savings while reducing their tax bill.
It is important to understand that salary sacrifice super is not a pay figure like the ones measured by the Salary Index. The index tracks gross full-time adult ordinary-time earnings before any salary sacrifice or tax. So if you earn $108,352 a year (index 100) and salary sacrifice $10,000 into super, your index figure remains 100, but your taxable income drops to $98,352.
How state differences affect salary sacrifice super
State average earnings vary significantly across Australia, and this influences how common salary sacrifice super is. In states with higher average earnings, employees have more room in their budget to sacrifice part of their salary. For example, the Australian Capital Territory has an index of 109.9 (annualised $119,090), and Western Australia sits at 106.9 ($115,825). Workers in these states are more likely to use salary sacrifice because they earn above the national line and can afford to divert some income into super.
In contrast, Tasmania has an index of 88.6 ($96,008), and South Australia is 94.6 ($102,450). Employees in these states may have less capacity to sacrifice salary, especially if they are closer to the national minimum wage. However, salary sacrifice is still available to anyone whose employer agrees, regardless of where they live. The key is whether the employee can afford the reduction in take-home cash.
State payroll tax rules can also affect employer willingness to offer salary sacrifice, but that is a separate consideration. For a deeper look at how each state compares, see our states page.
Industry differences in salary sacrifice super
Industry plays a big role in salary sacrifice super uptake. Industries with higher average earnings naturally have more employees who can benefit from the tax savings. Mining leads with an index of 154.7, meaning the average full-time worker in mining earns about 55% more than the national line. Professional, scientific and technical services follow at 114.7. In these industries, salary sacrifice super is a common part of remuneration packages.
On the other hand, Retail trade (index 75.9) and Accommodation and food services (72.5) have much lower average earnings. Employees in these sectors often rely on their full cash wage to meet living expenses, so salary sacrifice is less common. Even if an employer offers it, the employee may not want to reduce their take-home pay.
It is also worth noting that some modern awards set minimum wages that cannot be undercut by salary sacrifice. The sacrificed amount must come from above the award rate. For more on industry benchmarks, visit our industries page.
Practical considerations for salary sacrifice super
Before setting up salary sacrifice super, you need to consider the concessional contributions cap. The Australian Tax Office sets an annual limit on before-tax super contributions (including both your employer's super guarantee and any salary sacrifice amounts). If you exceed the cap, you pay extra tax. The super guarantee rate is 12% from 1 July 2026, and it applies to your ordinary time earnings. However, salary sacrifice contributions are not part of ordinary time earnings for super guarantee purposes, so your employer calculates the 12% on your reduced salary. This means your total super contributions (SG plus sacrificed) could be lower than if you had not sacrificed, unless you adjust the arrangement.
Salary sacrifice super also affects your take-home pay. For example, if you earn $108,352 (index 100) and sacrifice $10,000, your taxable income becomes $98,352. Using the 2026–27 resident tax rates (nil to $18,200; 15% to $45,000; 30% to $135,000; 37% to $190,000; 45% above) plus 2% Medicare levy, the tax saving is roughly $3,400. But your take-home cash is $10,000 less, so you need to be sure you can manage without that money.
How the Salary Index helps you compare
The Salary Index uses a simple formula: your yearly gross ordinary-time earnings divided by the national line ($108,352) times 100. This gives you a number that shows how your pay compares to the average full-time adult. Salary sacrifice super does not change your index because the index is based on gross earnings before any sacrifice. However, knowing your index can help you decide whether salary sacrifice makes sense. If you are in a high-index industry or state, you may have more flexibility to sacrifice. If your index is low, you might prefer to keep your cash.
For a full explanation of how the index is calculated, see how the index works. And for more topics related to pay and super, check our topics page.
Final thoughts
Salary sacrifice super is a valuable tool for reducing tax and building retirement savings, but it is not for everyone. Your decision should depend on your income, your budget, and your long-term goals. The state and industry you work in can influence how practical it is, but ultimately it comes down to your personal circumstances. Always check the concessional contributions cap and seek advice if you are unsure.
Questions people ask
How does salary sacrifice super affect my take-home pay?
Salary sacrifice super reduces your gross salary before tax, so your taxable income is lower. This means you pay less income tax and Medicare levy. However, your take-home cash is also lower because you have agreed to forgo part of your salary. The net effect is that more money goes into your super, and you pay less tax overall.
Is salary sacrifice super available in all industries?
Salary sacrifice super is generally available to most employees if their employer agrees. It is more common in industries with higher average earnings, such as Mining (index 154.7) and Professional services (114.7), where employees have more disposable income to sacrifice. In lower-paid industries like Retail (75.9) or Accommodation and food services (72.5), employees may be less likely to use it because they need the cash. Some modern awards or enterprise agreements may also place conditions on salary sacrifice arrangements.
Does salary sacrifice super reduce my Medicare levy?
Yes, because the Medicare levy is calculated as 2% of your taxable income. By salary sacrificing into super, your taxable income decreases, so the Medicare levy you pay also decreases. However, note that salary sacrifice does not affect the Medicare levy surcharge, which applies if you do not have appropriate private hospital cover and your income exceeds a threshold.