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How to boost your super balance with salary sacrificing

By Patrick Wright
Carla Donnelly stands in front of plants for a story about salary sacrificing into super.
Carla Donnelly used salary sacrificing to boost her super balance from $10,000 to $190,000.(



Carla Donnelly grew up thinking she'd never be able to afford her own home.

In her late 20s, she was single. And after spending some time living overseas, she started to worry about her financial future.

"I had a very small amount of super. I was just looking down the barrel of my 30s, and absolutely wigging out," the now 41-year-old from Geelong says.

"I was thinking I've got this paltry amount of money and I don't have any wealth that can be passed down to me [to buy a house]. I was living on my own and I felt exposed."

Fast forward to today and Carla has $190,000 in her super account. It means retirement is no longer a terrifying prospect.

"My balance is so healthy that I can take the foot off [the pedal] and think about how I want to do my finances differently now," she says.

With a solid foundation, she's also finally working towards her dream of owning a home.

So how did she do it? She used salary sacrificing.

It might sound confusing, but it's not that complicated. I promise!

And, as Carla found out, it can really pay off.

How salary sacrificing into super works

OK, so this is how it works:

  • When you salary sacrifice, you arrange with your employer to contribute an additional amount to your super out of your pre-tax pay.
  • The benefit is that you reduce your taxable income and therefore save on tax.
  • To set up salary sacrificing, contact your employer or payroll department.
  • Once you're set up, it's usually simple to change or cancel the arrangement. You may need to contact your employer or payroll department again.

The strategy is best suited to people earning $45,000 per year or more.

If you're earning less than that, salary sacrificing isn't as beneficial because the tax savings are minimal.

If you're thinking about salary sacrificing, here are four important things to keep in mind.

  1. 1.There is a cap on the amount of money you can contribute to super while getting a tax break. For the 2021-22 financial year, the limit is $27,500. Keep in mind this includes any mandatory super payments already made by your employer.
  2. 2.You won't be able to access any money you deposit into super until you meet one of the release conditions. For most people, this means waiting until retirement. However, if you're planning on buying your first home, you may be able to withdraw your salary sacrificed amounts using the First Home Super Saver scheme.
  3. 3.Not all workplaces offer salary sacrificing into super. For example, many small businesses may not give you an option.
  4. 4.If your workplace doesn't offer salary sacrificing, you can still make a lump sum contribution and claim a tax benefit. It will achieve a similar outcome, but you won't get the tax savings until you submit your tax return.

Finally, if you're earning under $45,000 a year, there's a separate government co-contribution scheme which you may be able to use to boost your balance.

Pros and cons of salary sacrificing into super

Richard Gough, a financial adviser based in Melbourne, says you shouldn't salary sacrifice money you may need for regular expenses.

"The thing to consider is your cashflow. If you put more money in your super fund, you're obviously [going to have less] in your pocket on payday," he says.

The other important thing to consider is how long the money will be locked up.

"Think about your age. If you're only 30, you've got at least 30 years until you retire. If you're 50, it's only another 10 years away," he says.

If you may need your money sooner, Mr Gough says to keep it outside of super. Or, if you have some money left over each pay, you could try a bit of both.

Carla Donnelly with her dog
Carla Donnelly started salary sacrificing when she was 28 and stopped about nine years later.(



"Having a balance is probably the best approach: putting a little bit extra [in super] plus also outside of super, that's the way to go," he says.

"You have to consider your short-term goals as well. You don't want to go too hard on the super and then go, 'Hang on, I can't afford my other goals' which could be buying a house, travelling or school fees.

"Look at it in the context of your entire financial world."

If you are happy to keep your money in super, salary sacrificing can be a huge boost, particularly if you start when you're young.

"For me, it's just a great disciplined way of saving," says Debbie Lin, an independent financial adviser based in Sydney.

"It never hits your bank account, you never see it, so you can't be tempted to spend it."

How salary sacrificing has helped Carla's financial security

When Carla started salary sacrificing, her goal was to simply catch up with the average balance for people her age.

She salary sacrificed about 9.5 per cent to super, about the same amount her employed contributed under the super guarantee.

In other words, she was doubling her super contributions each pay day.

"I'd probably put more in than I could financially afford at the time. It did create a bit of strain," she says.

While it wasn't easy, she says she's "so grateful" she did it.

That added sense of security has meant Carla is moving on to another financial goal.

Carla Donnelly and her partner smile while standing on a block of land.
Carla Donnelly and her partner have bought a block of land to build on in regional Victoria.(



Lately she's been busy thinking about her new home that's been constructed on a block at Armstrong, near Geelong.

"I did lots of research on the grants available [and] we went for a build, because we were able to get $25,000 from the federal government and $20,000 from the state government to do it regionally," she says.

"That's how we did it. It's like a miracle.

"Now I can just be kinder to myself. We've got this forever home, which we're so thrilled about."


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