Making the most of higher super contribution caps and salary sacrificing.

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Looking to put extra money into your superannuation fund, to increase your balance at retirement? Did you know that the personal superannuation contributions limits have increased? We’ll explore what you should consider when increasing your personal super contributions. 

How are superannuation contribution limits changing?

The amount of money people can contribute into their super increased as of 1st July 2021.

From this date, depending on your age and how much you’ve already got in retirement savings, the new concessional contributions limit (these are contributions made to your super fund before tax) will be $27,500 and the non-concessional contributions cap (the maximum that can be contributed by any one person into their superannuation) will be $110,000.

Pre-tax super contributions include an employer’s compulsory award and Superannuation Guarantee (SG) and additional voluntary contributions – including salary-sacrifice – and personal contributions a person makes for which they can claim a tax deduction.

In the table below you can compare the current contribution caps with the contribution caps that applied before 1st July 2021.

* Broadly applicable for people whose total super balance was less than $500,000 on 30 June of the previous financial year.

What will this change mean?

You’ll be able to boost your superannuation savings and have more for retirement because the contribution caps have increased.

If you make a voluntary pre-tax contribution, the increase in the cap for the 2021-22 financial year onwards will equate to a bigger deduction and tax saving.

It’s worth noting, that if you’re a salaried employee and your employer pays your super fund’s administration fees and/or insurance premiums on your behalf, these amounts also count towards your concessional contribution cap.

What steps can you take to make voluntary pre-tax super contributions?

You may be able to make concessional before-tax contributions to your super by asking your employer to deposit a portion of your income directly into your super account instead of your bank account. This type of before-tax super contribution is known as salary sacrificing.

What should I know about salary sacrificing into super?

Salary sacrificing into super is where you choose to have some of your before-tax income paid into your super account by your employer. This is on top of what your employer might pay you under the Superannuation Guarantee (SG), if you’re eligible. According to the Australian Taxation Office (ATO), “salary sacrificed super contributions are classified as employer super contributions, rather than employee contributions.” By making super contributions through a salary sacrifice agreement, these contributions are taxed in your super fund at a maximum rate of 15%. Generally, this tax rate is less than your marginal tax rate.

The rate of compulsory super that employers will need to pay, the Superannuation Guarantee (SG) increased on 1st July 2021 from 9.5% to 10%.

So, if you’re an income earner, the opportunity to make increased voluntary concessional contributions from 1st July 2021 will be partly absorbed by the increase in your employer’s SG contributions.

It’s intended that the SG will increase each year by 0.5% until it reaches 12% on 1 July 2025.

What are the potential benefits of salary sacrificing?

If you choose to reduce your pre-tax income by salary sacrificing into super, a potential benefit is that you may be able to reduce your taxable income for the financial year, which could mean you pay less in tax.

That’s because contributions made via a salary sacrifice arrangement are taxed at 15% if you earn under $250,000 a year, or 30% if a person earns $250,000 or more a year, which is often lower than what most people pay on their employment income.

Further, there could be additional tax benefits as investment earnings made inside super also benefit from an equivalent tax saving, which may make a difference when you do eventually withdraw your super savings and retire.

Also, there are benefits for first home buyers, who through the First Home Superannuation Saver Scheme, can withdraw up to $30,000 in voluntary super contributions, as well as the amount's earnings, to put towards their first home. From 1 July 2022, according to the ATO, eligible individuals will be able to release up to $50,000. However, if you don't end up using the money for your first home, you will have to pay a special tax to access the money, or wait until you have retired.

Consider if salary sacrificing is right for your circumstances.

There are pros and cons to salary sacrificing, and you need to consider your particular circumstances before proceeding. You can receive tailored advice from a financial advisor.

Salary sacrificing may be less suitable for people on a low income because the contributions to the super fund, taxed at 15%, may be more than their normal income tax rate.

It’s worth thinking about what might happen if your circumstances change. If you're salary sacrificing into your super, could you still make repayments if you lost your job? If you want to buy a house in future, your commitments will affect how much you can borrow.

It is up to you how much you sacrifice, and we recommend you seek financial advice if you need help deciding. If you do decide to proceed with salary sacrificing, get in touch with your employer’s payroll department to make the arrangements.

Example: Salary sacrificing up to the cap in FY20/21 versus FY21/22

Before the beginning of Financial Year 20/21, Tina, who earns $120,000 annually, wanted to assess the impact of after tax contributions versus salary sacrificing up to the maximum concessional contribution of $25,000. Her employer contributes 9.5% under the Superannuation Guarantee (SG)

Financial Year 20/21: Total net take home pay and net super contributions:

An increase of $3,060 due to tax savings.

In the next financial year, Tina’s concessional contribution cap increases to $27,500 and the employer SG increases to 10%.

Financial Year 21/22: Total take home pay and net super contributions:

An increase of $3,488 due to tax savings.

This is further explained in the table and accompanying assumptions below.



  1. Income tax is calculated using the personal income tax rates and thresholds, Medicare levy, Low and Middle Income Tax Offset (LMITO) effective for FY20/21 and FY21/22. The Medicare levy surcharge has not been included in this calculator.
  2. The tables only consider salary income.
  3. FY20/21: The superannuation guarantee (SG) contribution amount of 9.5% p.a. is only calculated on the gross income amount entered.
  4. FY21/22: The superannuation guarantee (SG) contribution amount of 10% p.a. is only calculated on the gross income amount entered.
  5. No allowances have been made for tax deductions or offsets other than the Low and Middle Income Tax Offset (LMITO).
  6. FY20/21: Concessional contributions (employer contributions including SG and salary sacrifice contributions) are capped at a maximum of $25,000 p.a. and are subject to contributions tax of 15% p.a.
  7. FY21/22: Concessional contributions (employer contributions including SG and salary sacrifice contributions) are capped at a maximum of $27,500 p.a. and are subject to contributions tax of 15% p.a.
  8. Since comparatives are based on the same contribution, the maximum after-tax contribution is limited by the concessional contributions cap.
  9. No allowance has been made for spouse contributions.
  10. No allowance has been made in this calculation for inflation or other changes in the cost of living.


If your actual situation differs from the assumptions made, then the calculations may differ from your actual amounts.

Visit the ATO website, for more information on salary sacrifice arrangements for employees and individual income tax rates or to access the ATO’s Simple Tax Calculator.


This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice. © Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.

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Lali Wiratunga

Lali Wiratunga believes in encouraging positive financial behaviours to boost people’s financial confidence and help organisations to deliver social impact. In 2016, Lali was recognised for creating a positive impact through Pro Bono Australia’s Impact 25. Following a career as a corporate lawyer and management consultant in the UK, he's had 17 years experience in roles across financial services in Australia. He serves in the community as a Board Director of Plate it Forward, a food-based social enterprise that drives equal opportunity through creating opportunities to employ, train and educate individuals who might otherwise be prevented from entering the workforce.

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