Super & Tax
Salary Sacrifice vs Personal Super Contributions: What Changes When You Freelance
Used to salary sacrifice into super through your employer? Here's how voluntary contributions work as a freelancer, and why the tax outcome is essentially the same.
When you were employed, salary sacrifice was the go-to way to get extra money into super. Your employer took the contribution out of your pay before tax, sent it to your super fund, and your taxable income dropped automatically. Simple.
When you go freelance, salary sacrifice disappears. There's no employer to route the money through, no payroll system to handle the tax treatment, and no automatic anything. But the tax benefit doesn't disappear with it. It just works differently.
As a freelancer, you make personal deductible contributions instead. The mechanism is different. The tax outcome is almost identical.
How salary sacrifice worked
A quick recap, because understanding the old system makes the new one easier to follow.
With salary sacrifice, you told your employer: "Pay $X of my pre-tax salary into super instead of paying it to me." Your employer deducted that amount before calculating PAYG withholding, so you paid less income tax on each pay cycle.
The contribution was taxed at 15% inside your super fund (contributions tax) instead of your marginal rate. If you were on $120,000 and salary sacrificed $10,000, your taxable income dropped to $110,000 and you saved $1,700 in tax.
Key features of salary sacrifice:
- Automatic. Set it up once, it happened every pay cycle
- Pre-tax. The money never hit your bank account
- No extra paperwork. Your employer handled everything
- Counted toward the concessional contribution cap (alongside employer super guarantee)
How personal deductible contributions work
As a freelancer (sole trader), there's no employer to route contributions through. Instead, you:
- Transfer money from your bank account to your super fund (usually via BPAY)
- Submit a Notice of Intent to Claim a Deduction to your super fund
- Claim the contribution as a tax deduction when you lodge your return
The contribution is taxed at 15% inside super, your taxable income drops by the contribution amount, and the tax saving is the difference between your marginal rate and 15%. Exactly the same economics as salary sacrifice.
The practical difference is timing. With salary sacrifice, the tax saving happened every pay cycle (lower withholding). With personal deductible contributions, you pay out of your own cash flow during the year and get the tax benefit when you lodge your return. The total saving over 12 months is identical, but you feel the cash flow differently.
Side-by-side comparison
| Salary sacrifice (employed) | Personal deductible (freelance) | |
|---|---|---|
| Who sends the money | Your employer | You |
| When tax benefit applies | Each pay cycle (lower withholding) | When you lodge your return (deduction) |
| Tax rate inside super | 15% | 15% |
| Extra paperwork | None | Notice of Intent form |
| Counts toward $30k cap | Yes (plus employer SG) | Yes |
| Net tax saving | Same | Same |
Tip
Since July 2017, all Australians under 75 can claim a tax deduction for personal super contributions, regardless of employment status. Before that rule change, freelancers had a harder time getting the same tax treatment as salary sacrificers. It's now a level playing field.
The one extra step: Notice of Intent
This is the main thing that catches people transitioning from employment to freelancing. With salary sacrifice, the tax treatment was automatic. With personal deductible contributions, you have to tell your super fund you intend to claim a deduction.
The form is called a Notice of Intent to Claim a Deduction (Section 290-170). Most super funds have their own version on their website. It takes about five minutes to fill in.
The rules:
- Submit it before you lodge your tax return for the relevant financial year
- Your fund must send you a written acknowledgement
- Keep the acknowledgement with your tax records
If you skip this step, the ATO treats your contribution as a non-concessional (after-tax) contribution. No tax deduction. No reduction in taxable income. The entire tax benefit is lost. On a $15,000 contribution at a 32% marginal rate, that's $2,550 in tax savings you've thrown away.
It's one form. Submit it as soon as your contribution lands.
What about Pty Ltd structures?
If you freelance through a company (Pty Ltd) and pay yourself a salary, the situation is different. Your company can make employer contributions or salary sacrifice arrangements for you, just like any other employer.
In that case, salary sacrifice works exactly as it did when you were employed at someone else's company. Your Pty Ltd is the employer, you're the employee, and the mechanics are the same.
Most freelancers operating through a Pty Ltd use a combination:
- Employer Super Guarantee (11.5% of salary, compulsory)
- Salary sacrifice (additional pre-tax contributions routed through payroll)
- Personal deductible contributions (if contributing above what the company pays)
All of these count toward the same $30,000 concessional cap. Make sure your accountant is tracking the total.
If you have both employment and freelance income
Many freelancers do some PAYG work alongside their freelance clients. If you're getting salary sacrifice through your PAYG job and also making personal super contributions from your freelance income, both count toward the same $30,000 annual cap.
Example: You earn $60,000 from a part-time job and $50,000 from freelancing. Your employer contributes $6,900 in Super Guarantee (11.5% of $60,000), and you salary sacrifice another $5,000. That's $11,900 in concessional contributions already.
Your remaining cap space for personal deductible contributions from your freelance income: $30,000 minus $11,900 = $18,100.
Warning
Exceeding the $30,000 cap is expensive. Excess contributions get added back to your assessable income and taxed at your marginal rate, plus an interest charge. If you have multiple contribution sources, track the total carefully. Check your year-to-date on myGov or with your super fund.
Making the transition
If you've just gone freelance and are used to salary sacrifice, here's how to set up the equivalent:
Log into your super fund and find the contribution payment details. You'll need a BPAY biller code and your personal reference number. If you're thinking about switching funds, see our guide on choosing a super fund as a freelancer.
To replicate the automatic feel of salary sacrifice, set up a monthly BPAY transfer from your business account to your super fund. Pick an amount that matches what you were salary sacrificing, or start with 11.5% of your expected monthly income.
Keep a simple record of each contribution (date, amount). Your super fund's app or website will show these, but having your own record helps at tax time.
Before you lodge your tax return, submit the Notice of Intent form to your fund. You can submit one notice covering all contributions for the financial year. Get the acknowledgement in writing.
Enter the total in the Personal superannuation contributions section. Your taxable income drops by the contribution amount.
The end result is the same as salary sacrifice: money goes into super at 15% instead of your marginal rate. You just have to be the one who makes it happen.
Key takeaway
Salary sacrifice and personal deductible contributions achieve the same tax outcome. The difference is who sends the money (employer vs you) and one extra form (Notice of Intent). If you were salary sacrificing as an employee, you can replicate the exact same benefit as a freelancer. The tax system doesn't penalise you for being self-employed.
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Frequently asked questions
Is the tax saving really identical?
For practical purposes, yes. Both methods result in the contribution being taxed at 15% inside super instead of your marginal rate. The minor difference is timing: salary sacrifice reduces your taxable income each pay cycle, while personal deductible contributions reduce it when you lodge your return. The annual tax saving is the same.
Can I salary sacrifice into super as a sole trader?
No. Salary sacrifice requires an employer-employee relationship. As a sole trader, you don't employ yourself. You make personal deductible contributions instead, which achieve the same result. If you operate through a Pty Ltd and pay yourself a salary, then yes, you can salary sacrifice.
What if I forget the Notice of Intent?
Your contribution becomes a non-concessional (after-tax) contribution. No tax deduction. It counts against your $120,000 non-concessional cap instead of the $30,000 concessional cap. You can't fix this retroactively once you've lodged your return. Set a reminder.
Should I contribute monthly or in a lump sum?
Either works. Monthly contributions replicate the salary sacrifice rhythm and are easier to budget for. A lump sum before June 30 gives you more flexibility and lets you optimise based on your actual annual income. Many freelancers do both: monthly base plus a year-end top-up.
I used to salary sacrifice $500/month. Should I continue the same amount as a freelancer?
It's a good starting point, but reconsider whether the amount is still right. As a freelancer your income may be different, you have more expenses to cover, and you might need a larger cash buffer. Use our super calculator to check the tax saving at your current income, and adjust from there.
Does the super guarantee apply to freelancers?
Not to sole traders. The 11.5% Super Guarantee is a legal obligation for employers to pay for their employees. As a sole trader, you're not your own employee. Your contributions are entirely voluntary. That said, contributing the employer-equivalent 11.5% is a smart baseline to ensure your retirement savings don't fall behind where they'd be if you were employed.
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The complete guide to freelancing in Australia. Tax, super, BAS, contracts, and pricing, explained step by step.