Understanding the best salary sacrifice car against the national average
When Australians ask about the "best salary sacrifice car", they are usually looking for a vehicle that maximises the tax benefits of a novated lease or salary packaging arrangement. To see how such a decision affects your take-home pay, it helps to start with the national full-time average salary. According to the ABS Average Weekly Earnings for May 2026, the full-time adult ordinary-time average is $2,083.70 per week, or about $108,352 per year. This is the benchmark used on this site.
How salary sacrifice works
Salary sacrificing a car means you arrange with your employer to deduct car expenses from your pre-tax salary. The most common method is a novated lease, where a finance company leases the car to your employer, and you repay the lease and running costs from your salary before tax. This reduces your taxable income, so you pay less income tax and Medicare levy. However, the car is a fringe benefit, and your employer may have to pay Fringe Benefits Tax (FBT) unless an exemption applies. The ATO sets the rules for FBT, including the statutory formula method and the operating cost method.
The tax brackets and your take-home
For the 2026–27 financial year, the resident tax rates are: nil up to $18,200; 15% from $18,201 to $45,000; 30% from $45,001 to $135,000; 37% from $135,001 to $190,000; and 45% above $190,000. Plus a 2% Medicare levy (before reductions). If you earn the average of $108,352, you are in the 30% marginal bracket (plus 2% Medicare). Salary sacrificing a car could reduce your taxable income below $135,000, but you remain in the 30% bracket unless you sacrifice enough to drop below $45,000, which is unlikely for a typical car. The real benefit is that every dollar sacrificed saves you 32 cents in tax and Medicare (30% + 2%). For someone on the average, a $15,000 annual sacrifice would save about $4,800 in tax, but you still have to pay the lease costs.
What is the "best" salary sacrifice car?
There is no single best car because the optimal choice depends on your salary, how much you drive for work, and the FBT treatment. Generally, cars with lower FBT liability are better. The ATO's statutory formula uses the car's base value and a flat rate (currently 20% for cars complying with the luxury car limit). Electric vehicles (EVs) may have FBT exemptions if they meet certain criteria. Also, if you use the car mainly for work, you might use the operating cost method to reduce FBT. The "best" car is one that suits your needs and minimises the after-tax cost. For a detailed guide, see our Guides section.
Comparing with other benchmarks
The full-time median salary is about $90,532 (ABS Employee Earnings, August 2025). If you earn the median, your marginal tax rate is also 30% (plus Medicare), so the tax saving per dollar sacrificed is the same. However, the lower your salary, the less you can afford to sacrifice without affecting your living expenses. The national minimum wage from 1 July 2026 is $26.44 per hour, or $52,255 per year on 38 hours. At that level, the marginal rate is 15% plus Medicare, so the tax saving is only 17 cents per dollar. Salary sacrificing a car may not be worthwhile for minimum wage earners.
State differences
The average full-time salary varies by state. For example, the Australian Capital Territory has the highest average at $119,090, while Tasmania has the lowest at $96,008. If you live in a higher-average state like ACT or Western Australia ($115,825), the tax savings from salary sacrificing a car are larger because you are likely in a higher bracket (37% if above $135,000). Conversely, in Tasmania, the average is below $100,000, so the benefit is smaller. See our States and territories page for more details.
Take-home pay sketch
Let's sketch a resident earning the national average of $108,352. Without salary sacrifice, their annual tax (including Medicare) is roughly: $0 on first $18,200; $4,020 on next $26,800 (15%); $19,005.60 on next $63,352 (30%); plus 2% Medicare on all above $18,200 ($1,803.04). Total tax about $24,828.64, leaving take-home about $83,523.36. If they salary sacrifice $15,000 for a car, taxable income becomes $93,352. Tax: $0 on $18,200; $4,020 on $26,800; $13,965.60 on next $46,552 (30%); Medicare $1,503.04. Total tax $19,488.64, take-home $73,863.36 plus the car benefit. The net cash flow depends on the lease cost.
Important considerations
Salary sacrificing a car is not just about tax. You must consider the residual value, running costs, and whether the car is used for personal travel. The ATO requires that the car be available for your use, and FBT applies unless you keep a logbook to show business use. The best salary sacrifice car for you might be a fuel-efficient vehicle or an EV to reduce FBT. Always check the latest ATO guidelines and consult a tax advisor.
Conclusion
The "best salary sacrifice car" is a personal decision that should be evaluated against your salary, tax bracket, and lifestyle. Using the national average as a reference, you can estimate the tax savings and see how they affect your take-home pay. For more information, Place a salary on the line to see where you stand.