How Salary Sacrifice Works With a TTR Strategy

A salary-sacrifice TTR strategy uses two moving parts at once. You redirect some future salary into super at the 15 percent contributions tax rate, and you draw a transition to retirement pension so household cash flow does not fall by the full amount sacrificed.

Sacrificing $15,000 does not ordinarily reduce take-home cash by $15,000. The sacrificed salary would otherwise have been taxed at your marginal rate, including the Medicare levy. The cash-flow gap is the after-tax amount, and that is the amount the pension is trying to replace.

If you want the broader TTR rules first, read the transition to retirement pension guide. The Transition to Retirement Calculator runs the same comparison with your own salary and balance.

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The 2026–27 figures that sit behind the strategy

• Concessional contributions cap: $32,500
• Super Guarantee: 12 percent of ordinary time earnings
• Carry-forward unused concessional cap: only if total super balance was less than $500,000 at 30 June of the previous financial year. For a FY2026–27 example, that date is 30 June 2026
• Division 293 threshold: $250,000

Employer Super Guarantee, salary sacrifice and personal deductible contributions share that $32,500 cap. A TTR pension does not create extra cap room.

Salary sacrifice can only apply to earnings you have not yet derived. You cannot ordinarily sacrifice salary that has already been paid.

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How the pieces fit together

A typical structure looks like this:

1. You have reached preservation age 60 and your fund will start a TTR.
2. You agree with your employer to salary-sacrifice an amount of future pay.
3. Super Guarantee and the sacrificed amount go into accumulation, not into the pension.
4. The TTR pension pays you an income stream, within the 4 percent minimum and 10 percent maximum, to replace some of the take-home pay you gave up.

You then have two accounts. Accumulation receives contributions. The pension pays income. New money does not go directly into the pension.

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A complete baseline versus TTR calculation

This illustration uses the 2026–27 resident tax scales including the 2 percent Medicare levy. It assumes a taxed super fund, pension payments that are tax-free in the member's hands at age 60 or over, no Division 293, and no extra insurance change. It is not personal advice.

Shared facts

• Age 61
• Gross salary: $120,000
• Employer Super Guarantee at 12 percent: $14,400
• Concessional cap remaining after SG: $32,500 − $14,400 = $18,100
• Proposed salary sacrifice: $15,000 (within remaining cap)
• Super used to start the TTR: $400,000
• Extra pension-account administration: $180 a year

Baseline: no TTR, no extra sacrifice

• Income tax and Medicare on $120,000: $28,920
• Take-home pay: $91,080
• SG after 15 percent contributions tax: $12,240

TTR plus $15,000 salary sacrifice

• Taxable salary: $105,000
• Income tax and Medicare on $105,000: $24,120
• Take-home pay from salary: $80,880
• Reduction in take-home pay from salary: $10,200
• Contributions tax on the $15,000 sacrifice: $2,250
• Net extra amount reaching super: $12,750

The pension only needs $10,200 to restore the original take-home pay. On a $400,000 TTR:

• 4 percent minimum: $16,000
• 10 percent maximum: $40,000

The minimum is higher than the $10,200 gap, so the pension pays $16,000, not $10,200.

Year-one comparison, ignoring investment returns

Cash in hand is higher because the 4 percent minimum overshoots the salary-sacrifice gap. Super is lower by $3,250 plus the $180 fee, before investment returns. If the aim was to grow super, this starting balance is too large for a $10,200 cash-flow gap. A TTR of about $255,000 would make the 4 percent minimum sit close to $10,200, and the leftover super could stay in accumulation.

That is the comparison the calculator is built to show. Changing the starting pension balance changes the result more than changing the adjective you put on the strategy.

Compare baseline and TTR figures in the calculator

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When the tax gap shrinks

The personal-tax saving exists because $15,000 is taxed at 15 percent inside super instead of at the 32 percent marginal rate (30 percent plus 2 percent Medicare) that applied to that slice of a $120,000 salary.

Division 293 can narrow that gap. If income plus concessional contributions exceed $250,000, an extra 15 percent can apply to some or all of those contributions. In that case the super tax on the sacrificed amount is no longer a simple 15 percent.

Carry-forward unused cap can increase capacity, but only if total super balance was under $500,000 at the previous 30 June. It is not available just because this year's $32,500 has not been used yet.

The tax treatment of the pension itself is a separate topic: tax on a transition to retirement pension.

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When this structure is usually a poor fit

• Super Guarantee already uses most of the $32,500 cap.
• Division 293 would apply to the extra contributions.
• The 4 percent minimum would force a much larger withdrawal than the cash-flow gap, and you do not want that extra money out of super.
• Extra fees would absorb the tax difference.
• You only intend to keep the structure in place until you turn 65 in the near term. The age-65 change may be a cleaner point to review pensions anyway.

If the comparison does not show a clear benefit after tax, fees and the minimum payment, leave the money in accumulation. The broader list of ways a TTR can backfire is in the transition to retirement pension guide.

If you want this modelled as part of a contribution and retirement-income plan, I can help through my retirement planning service.

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FAQs

How does salary sacrifice work with a transition to retirement pension?

You agree to salary-sacrifice future earnings into super, which uses part of the concessional cap, and you draw a TTR pension to replace some of the take-home pay you would otherwise have lost.

Does salary sacrificing with a TTR reduce tax?

It can reduce personal income tax if your marginal rate is higher than the 15 percent contributions tax, but the net result still depends on the concessional cap, extra fees, the pension minimum and how long the structure runs.

Do concessional contribution caps still apply with a TTR?

Yes. For 2026–27 the concessional cap is $32,500 and it is shared by employer Super Guarantee, salary sacrifice and personal deductible contributions.