By Philippa Billings, Chief Advice Officer, Otivo
Salary sacrifice in your thirties is a long game. In the final stretch before retirement it changes character, because the money you redirect isn't locked away for decades anymore, it's locked away for years, or even months. That shorter horizon, combined with peak earnings, is what makes the run-up to retirement a natural time to look hard at salary sacrifice. Here's how it works when retirement is close.
Salary sacrifice before retirement redirects before-tax pay into super, generally taxed at 15% rather than your marginal rate — or up to 30% for high-income earners, where Division 293 applies to combined income above $250,000. In the final working years it can be tax-effective while the lock-up period is short. As at July 2026, it counts towards the $32,500 concessional cap for 2026-27, combined with employer super guarantee and any personal deductible contributions.
How does salary sacrifice work close to retirement?
The mechanics are the same as at any age. You agree with your employer to redirect part of your before-tax salary into super, where it's generally taxed at 15% rather than your marginal rate. If your combined income is above $250,000, Division 293 adds a further 15% on the contributions above that threshold, taking the tax on those to 30% — explained in more detail below. What changes near retirement is the context. The money is only preserved until you meet a condition of release, which for someone in their late fifties or sixties may be just a few years away, so the usual concern about locking money up for the long haul carries far less weight.
Why can the pre-retirement years suit salary sacrifice?
Three things tend to line up in these years. Earnings are often at their highest, so the gap between your marginal rate and the rate applied to contributions is at its widest. The wait until you can access the money is short. And if you haven't used your full concessional cap in recent years, there may be extra room through carry-forward. For someone like a 58-year-old on $120,000 with the mortgage cleared, those factors can make redirecting part of their salary into super an efficient use of the final working stretch, though whether it suits depends on their circumstances.
How much can you salary sacrifice?
The concessional cap for 2026-27 is $32,500, and it's a combined limit covering your employer's super guarantee, any salary sacrifice, and any personal deductible contributions together. So the room for salary sacrifice is what's left after your employer's super guarantee is counted. Carry-forward may lift your effective cap if you have unused space from the previous five years and are eligible. For very high earners, Division 293 adds an extra 15% on concessional contributions above a $250,000 combined-income threshold, taking the tax on those to 30%, though they stay concessionally taxed.
Can you salary sacrifice and draw a transition to retirement pension at the same time?
Yes, and some people do. After reaching preservation age, a transition to retirement income stream lets you draw a limited amount from super while still working — at least 4% and no more than 10% of your account balance each year, so access is capped rather than open-ended — and it can be run alongside salary sacrifice so contributions keep flowing in at the concessional rate. Where personal contributions are involved and you intend to claim a deduction, a valid notice of intent still needs to be lodged with your fund and acknowledged. This is an area where the numbers are individual, so it rewards modelling your own position rather than following a rule of thumb.
What are the trade-offs near retirement?
Salary sacrifice reduces your take-home pay, so it has to fit the household budget in these years just as at any other time. The contributions are preserved until a condition of release, and going over the concessional cap brings the excess into your assessable income at your marginal rate, with a 15% offset and an excess charge. Weighed against those, the short lock-up and the tax efficiency are what draw people to it late in their working life.
Frequently asked questions
Is salary sacrifice worth it close to retirement?
It can be, because the lock-up is short and earnings are often at their peak, widening the tax benefit. Contributions are generally taxed at 15%, or up to 30% if your combined income is above $250,000. Whether it suits depends on your income, expenses and how close you are to accessing your super.
Can I salary sacrifice while drawing a transition to retirement pension?
Yes. After preservation age, many people run a transition to retirement income stream alongside salary sacrifice, drawing between 4% and 10% of the account balance each year while continuing to contribute at the concessional rate.
How much can I salary sacrifice before I retire?
Up to the combined concessional cap of $32,500 for 2026-27, less your employer's super guarantee, and potentially more if you're eligible to use carry-forward from unused cap in the previous five years.
The final working years are a natural time to look hard at this lever. Otivo, a licensed Australian financial advice platform holding AFSL and Australian Credit Licence No. 485665, offers a salary sacrifice contributions module that weighs your income, age, retirement age and expenses to show whether redirecting some salary makes sense for you. It turns the timing question into a clear answer.
Sources
- Australian Taxation Office — salary sacrificing super, concessional contributions cap, transition to retirement, carry-forward and Division 293 — ato.gov.au
- ASIC MoneySmart — salary sacrificing and transition to retirement — moneysmart.gov.au
Disclaimer
The information in this communication is current as at July 2026 and has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.