Super · Property — updated May 2026
Salary sacrifice into super vs extra mortgage repayments: which wins?
The tax advantage of salary sacrifice is real — but so is the mortgage as a guaranteed return and the liquidity of an offset. Here's the complete comparison, with numbers.
The tax saving from salary sacrifice
When you salary sacrifice, your employer pays the contribution to super before it reaches your pay packet — so you never pay income tax on it. Instead, contributions are taxed at 15% inside super. The net saving depends on your marginal rate:
$45,001–$120,000
19.5c per $1 sacrificed32.5% + 2% ML = 34.5%
Sacrifice $10k → net cost to take-home only $6,550
$120,001–$135,000
21.5c per $1 sacrificed34.5% + 2% ML = 36.5%
Sacrifice $10k → net cost to take-home only $6,350
$135,001–$190,000
24c per $1 sacrificed37% + 2% ML = 39%
Sacrifice $10k → net cost to take-home only $6,100
Above $190,000
32c per $1 sacrificed45% + 2% ML = 47%
Sacrifice $10k → net cost to take-home only $5,300
Note
The mortgage as a guaranteed return
Extra mortgage repayments (or money in an offset account) earn the mortgage interest rate — currently around 6.0–6.5% for variable loans. This is a guaranteed, risk-free return. There is no investment risk, no sequence-of-returns risk, no volatility.
For someone paying 6.5% on their mortgage, keeping $10,000 in an offset account saves $650/year in interest — equivalent to a 6.5% after-tax return. This is meaningfully better than most savings accounts and comparable to conservative bond-like returns.
Worked example: $100k income, $500k mortgage at 6.5%
You have $1,000/month of discretionary income after minimum mortgage repayments. Should you put it into salary sacrifice or extra mortgage repayments (offset)?
Option A: Salary sacrifice $1,000/month pre-tax
Option B: $655/month into mortgage offset (after-tax equivalent)
Salary sacrifice wins by approximately $12,000–$15,000 over 10 years on an after-tax-equivalent basis, primarily because of the 19.5c/dollar tax saving and the compounding effect inside super. However, the $78,600 offset balance is accessible at any time; the $165,000 in super is locked until age 60.
Tip
The liquidity trade-off
Super is illiquid until preservation age (60). An offset account is accessible today. This difference is not just psychological — it's a real financial constraint:
Job loss
Offset
Access offset immediately
Super
Cannot access super (unless severe financial hardship)
Medical emergency
Offset
Access offset immediately
Super
Compassionate grounds — complex and slow process
Home renovation
Offset
Use offset freely
Super
Not accessible for this purpose
Retirement income
Offset
Use alongside super
Super
Tax-free earnings from age 60+
Frequently asked questions
Why does salary sacrifice beat mortgage repayments in the example?
Salary sacrifice contributions are taxed at 15% inside super, not at your marginal rate. At $100k income, your marginal rate is 34.5% (including Medicare). So $1,000 of pre-tax salary sacrificed into super costs you only $850 in take-home pay (you save $345 in income tax, but pay $150 in super tax). That $1,000 inside super grows at the fund's return rate (historically 7–9%/yr). The after-tax equivalent of putting $1,000 into your mortgage is just $650 in extra repayment — salary sacrifice starts with more capital.
What is the concessional contributions cap?
For 2025–26, the concessional contributions cap is $30,000 per year — including your employer's SGC contributions (11.5% of salary). At $100,000 salary, your employer contributes $11,500 in SGC, leaving $18,500 of cap space for personal salary sacrifice. Contributions above $30,000 are taxed at your marginal rate minus the 15% already paid — effectively undoing the concession.
What is the carry-forward rule?
If your super balance was below $500,000 on 30 June of the previous year, you can carry forward unused concessional cap space from up to 5 previous years. This means someone who didn't salary sacrifice in prior years may be able to make a much larger concessional contribution now, potentially catching up significantly.
Can I access my super if I need the money?
Super is locked until your preservation age (60 for anyone born after 1 July 1964) and you meet a condition of release (retired, turning 65, terminal illness, severe financial hardship, or compassionate grounds). This illiquidity is the primary trade-off vs a mortgage offset account, which you can access any time. This is why the 'do both' approach — salary sacrifice AND offset — is often recommended.
Does this analysis change at different income levels?
Yes significantly. At $80,000 income (32.5% + 2% Medicare = 34.5% marginal rate), salary sacrifice saves 34.5% in income tax and pays 15% inside super — a net tax saving of 19.5%. At $120,000 income (34.5%), the saving is similar. At $190,000 income (47%), salary sacrifice saves 32 cents in the dollar. The higher your marginal rate, the more attractive salary sacrifice becomes relative to mortgage repayments.
What happens when I retire: can I use super to pay off the mortgage?
Yes. From age 60, super in retirement phase is tax-free for earnings and withdrawals. You could draw a lump sum from super to pay down or pay off your mortgage in one transaction. This strategy — aggressively salary sacrificing while maintaining the mortgage, then clearing it from super at retirement — can be very effective for people in their 50s who have built up substantial super balances.