Salary Sacrifice Into Super or Pay Down the Mortgage?

Take $10,000 of pre-tax pay. Send it to super and $8,500 arrives after the 15% contributions tax. Take it as salary on a 32% marginal rate and $6,800 reaches your mortgage.

Super starts 25% ahead before a cent of growth. At higher incomes the head start is bigger. That's the whole tax argument, and it's a strong one.

The counter-argument is that you can't touch super until preservation age, and your mortgage is a guaranteed, tax-free return you can feel every month.

Marginal rates include the 2% Medicare levy.

What you save per $1,000

The saving is your marginal rate minus 15%. That's it.

2026-27 rates, including the 2% Medicare levy. The second bracket rate fell from 16% to 15% on 1 July 2026.

The bottom row is the one people miss. Above $250,000 of income plus contributions, Division 293 adds another 15% to your concessional contributions. Effective contributions tax becomes 30%, and the benefit halves from $320 to $170 per $1,000. Still worth doing. Just not the number you were quoted at the barbecue.

The top row is the other one. On the lowest taxable bracket you're saving $20 per $1,000 and locking the money away for decades. Look at the government co-contribution or the spouse contribution offset instead.

How much room do you actually have?

The concessional cap is $32,500 from 1 July 2026, indexed up from $30,000. It includes your employer's super guarantee, now 12% of ordinary time earnings.

So your real headroom is smaller than the cap suggests.

Go over the cap and the excess is taxed at your marginal rate with an interest charge on top, which turns a tax saving into a tax bill. Check your last payslip and your fund's contribution history before you set the sacrifice amount, and remember bonuses can push you over late in the year.

Twenty years of $10,000 a year

Put the same $10,000 of pre-tax pay to work both ways for 20 years, on a 32% marginal rate.

• Super: $8,500 a year, growing at 6.5% after fees and earnings tax, reaches roughly $351,000.
• Mortgage: $6,800 a year against a loan at 6%, avoiding roughly $265,000 of interest and principal cost.

Super is about $86,000 ahead. Two things about that gap.

It depends entirely on the return assumption. If markets deliver 4% instead of 6.5%, the gap narrows sharply. The mortgage return is certain, because your rate is your return. The super return is not.

And it depends on the rate. A 6% mortgage makes the comparison close. A 9% mortgage, which is inside APRA's stress-test buffer, changes the answer.

When the mortgage wins

• You might need the money. A career change, a baby, a business idea, a health event. Super answers none of these before preservation age.
• Your rate is high. Paying down an 8% mortgage is a guaranteed 8% tax-free return with no market risk attached.
• You're on the lowest taxable bracket. $20 per $1,000 isn't worth the lock-up.
• You're decades from 60. A 28-year-old is committing money for 32 years, through several changes of government and super policy.
• The repayment is uncomfortable. Reducing mortgage stress has a value the spreadsheet doesn't capture.

When super wins

• You're 50 or older. Shorter lock-up, same tax benefit, and you can see preservation age from here.
• Your marginal rate is 39% or 47%. $240 or $320 per $1,000 is a large, certain, immediate return.
• The mortgage is nearly gone. Once the balance is small, the interest saved is small too.
• You already have an emergency buffer. Access matters less when you have cash elsewhere.
• You have unused cap from previous years. Carry-forward rules let you use unused concessional cap from the past five years if your total super balance was under $500,000 on the previous 30 June. Useful after parental leave or a low-income year.

The middle path most people take

Offset first, then super, then extra repayments.

Build an emergency buffer in your offset account. It reduces mortgage interest at your full loan rate while staying completely accessible. Once that buffer is a genuine six months of expenses, start the salary sacrifice.

Offset money does something neither of the other two can do. It cuts your interest bill and remains available. The Offset Mortgage Calculator shows what a given balance is worth.

One practical note. Salary sacrifice is an agreement with your employer to redirect future pay, so it has to be arranged in advance. You can't retroactively convert money you've already been paid. If your employer's payroll makes it hard, a personal deductible contribution with a notice of intent to claim gets you to a similar place, and you can do it after the fact.

The bottom line

Super wins on tax by $1,700 per $10,000 at a 32% marginal rate, and by $3,200 at 47%. The mortgage wins on certainty and access.

If your marginal rate is 39% or above and you have an emergency buffer, salary sacrifice is doing more work. If your rate is 32% or below, or the money might be needed, the mortgage is the safer place for it.

Most people don't have to choose one. Build the buffer, sacrifice to a target you can sustain, and put the rest on the loan.

Sources checked August 22, 2026: ATO contributions caps for the $32,500 concessional cap from 1 July 2026, ATO concessional contributions cap guidance, ATO resident tax rates, and Moneysmart on super contributions. This is general information, not personal advice.