You have $20,000 spare this year. Do you salary sacrifice it into super, or park it in your mortgage offset account? Both are smart moves — but they win in different ways. Salary sacrifice gives you an instant, guaranteed tax saving (your marginal rate minus the 15% super contributions tax). A mortgage offset gives you a tax-free return equal to your mortgage interest rate — roughly 6.25% to 6.50% in October 2026 — with the money staying accessible. This guide compares them head-to-head with worked examples, so you can choose based on your income, age and mortgage.
The context matters: the Reserve Bank has lifted the cash rate to 4.60% (September 2026, the highest since 2011), and the big four banks’ variable mortgage rates now sit around 6.24% to 6.50%. Every dollar in your offset is working harder than it has in 15 years. Meanwhile the concessional super contributions cap is $30,000 for 2025-26, and contributions are taxed at 15% inside the fund (30% for very high earners under Division 293). Model your own numbers with our salary sacrifice calculator and super calculator.
How each option actually works
Option A: salary sacrifice into super
Salary sacrifice redirects part of your pre-tax salary straight into your super fund. You pay 15% contributions tax inside the fund instead of your marginal income tax rate (plus the 2% Medicare levy) on that money. Your instant, locked-in saving is the difference:
| Your marginal tax rate (incl. 2% Medicare) | Tax on $20,000 as salary | Tax as salary sacrifice (15%) | You save |
|---|---|---|---|
| 18% (on $45,000 income) | $3,600 | $3,000 | $600 |
| 32% (on $110,000 income) | $6,400 | $3,000 | $3,400 |
| 39% (on $160,000 income) | $7,800 | $3,000 | $4,800 |
| 47% (on $220,000 income) | $9,400 | $3,000 | $6,400 |
The saving grows with your income — because the higher your marginal rate, the more tax you avoid. At $220,000, sacrificing $20,000 saves you $6,400 in a single year. On top of that, the money then compounds inside super, where earnings are taxed at a maximum of 15% instead of your marginal rate.
Option B: mortgage offset account
An offset account holds cash against your home loan: you only pay interest on the loan balance minus the offset balance. A $600,000 loan at 6.25% with $50,000 in offset is charged interest on $550,000 — saving you $3,125 a year in interest. That saving is effectively tax-free: it’s interest you never pay, so no tax is due on it. To earn the equivalent return in a savings account you’d need roughly 9% before tax at a 32% marginal rate.
Crucially, offset money stays accessible — it’s your cash, withdrawable any time. Super, by contrast, is locked away until preservation age (60 for everyone born after July 1964).
Head-to-head: the same $20,000, two destinations
Meet Emma: 45 years old, earns $130,000, has a $500,000 variable mortgage at 6.35%, and has $20,000 of spare cash this year. Her marginal rate is 32% (30% + Medicare).
| Measure | Into super (salary sacrifice) | Into offset |
|---|---|---|
| Immediate tax/interest saving | $3,400 (32% − 15% on $20,000) | $1,270/yr interest avoided (6.35% × $20,000) |
| Value of saving over 15 years (to age 60) | $3,400 plus ~15 years of compounding in a 15%-taxed environment | ~$19,000 of cumulative interest avoided, growing as the loan compounds |
| Access before 60 | Locked until preservation age | Fully accessible |
| Risk | Market risk (depends on investment option) | Guaranteed return = mortgage rate |
| Effect on borrowing power | None | Lower repayments / faster payoff improves serviceability |
On pure numbers for Emma, super wins on the immediate dollar saving ($3,400 vs $1,270). But the offset’s advantage is certainty and flexibility — and the comparison flips if any of the following apply.
When the offset wins
- You need a safety buffer. Super is locked until 60. If you don’t yet have 3-6 months of expenses accessible, the offset wins by default — financial resilience beats tax optimisation.
- You’re young with a big mortgage. A 30-year-old with a $700,000 loan and 30+ years until preservation gets enormous compounding value from killing interest early. Every extra dollar in offset shortens the loan and reduces total interest — often by two to three times the dollar contributed over the loan’s life.
- Your marginal rate is low. On $45,000, salary sacrifice saves just 3 cents in the dollar (18% − 15%). At that income, the offset’s ~6.35% guaranteed return is far better value — and you keep access to the money.
- You might need the cash. Career break, parental leave, starting a business, school fees — offset money is there when life happens.
- You’ve hit the concessional cap. With SG at 12% plus any salary sacrifice, higher earners can bump against the $30,000 cap. Once it’s full, the offset is the natural overflow.
When salary sacrifice wins
- You’re on a high marginal rate. At 39% or 47%, the instant tax saving ($4,800-$6,400 per $20,000) dwarfs a year’s offset interest. The maths is overwhelming for top-bracket earners.
- You’re closer to retirement. At 55, money sacrificed is accessible in five years — the lock-in barely matters, and the tax arbitrage is banked immediately.
- Your mortgage is small or gone. Once the offset is full relative to the loan (or the loan is paid off), extra cash in offset earns nothing. Super’s 15% tax environment then beats any savings account.
- Your employer offers matching. Some employers match salary-sacrifice contributions up to a limit — free money that no offset can compete with.
- You can use carry-forward caps. If your total super balance is under $500,000, you can use unused concessional cap amounts from the previous five years — potentially sacrificing far more than $30,000 in one year.
The hybrid: most people should do both
This isn’t really an either/or decision — it’s a sequencing one. A sensible order for most households:
- Build the buffer first. Get 3-6 months of expenses into your offset. This is non-negotiable.
- Check your concessional cap space. Your employer’s 12% SG counts toward the $30,000 cap. On $130,000 that’s $15,600 of SG, leaving $14,400 of sacrifice room.
- Split the surplus. If you’re on 32%+ marginal rates, salary sacrifice up to your remaining cap — the tax saving is too good to leave. Send the rest to the offset for flexibility and interest savings.
- Review yearly. Rates, caps, your income and your mortgage all move. Re-run the comparison each financial year.
One more consideration: super contributions also reduce your adjusted taxable income, which can increase eligibility for things like the private health insurance rebate tiers and reduce exposure to the Medicare Levy Surcharge and Division 293. Offset money doesn’t do that — but it does reduce your non-deductible debt, which is the most expensive debt most households carry.
Frequently asked questions
Is salary sacrifice better than a mortgage offset?
It depends on your marginal tax rate and age. On high incomes (39-47% marginal rates) salary sacrifice usually wins on pure dollars because the instant tax saving is so large. On lower incomes or when you need accessible cash, the offset’s ~6.3% tax-free return with full liquidity usually wins.
Does money in an offset account earn interest?
No — it doesn’t earn interest; it avoids interest. You pay interest only on your loan balance minus the offset balance. The effective return equals your mortgage rate, and it’s tax-free.
Can I salary sacrifice if I’ve already hit the $30,000 cap?
You can, but you shouldn’t — excess concessional contributions are taxed at your marginal rate plus an interest charge, wiping out the benefit. Use the offset (or non-concessional contributions) for the overflow instead.
Does salary sacrifice reduce my take-home pay?
Yes, but by less than the sacrificed amount. Sacrificing $20,000 on a 32% marginal rate reduces take-home by about $13,600 — the other $6,400 was going to the ATO anyway.
What about Division 293?
If your income plus concessional contributions exceeds $250,000, an extra 15% tax applies to some or all concessional contributions — making the effective contributions tax 30%. Salary sacrifice still beats a 47% marginal rate, but the advantage shrinks. The offset becomes relatively more attractive at that level.
Should I pay down the mortgage or contribute extra to super?
Making extra repayments (not just offset) permanently reduces the loan, while offset keeps cash accessible. If you’re sure you won’t need the money, extra repayments and salary sacrifice are both strong; if flexibility matters, offset plus salary sacrifice to the cap is the balanced play.
Conclusion
In October 2026, with mortgage rates above 6% and the cash rate at 4.60%, the offset account is genuinely competitive with super for the first time in years. But the tax code still heavily favours salary sacrifice for higher earners — a 17 to 32 cent-in-the-dollar instant saving is hard to beat. The winning strategy for most Australians: buffer in the offset first, salary sacrifice to your remaining concessional cap second, and overflow into the offset third.
Run your own comparison with our salary sacrifice calculator to see your exact tax saving, project the long game with the super calculator, and sanity-check your overall position with the income tax calculator. Because caps, rates and your circumstances change yearly, revisit the split every financial year.