Can you salary sacrifice a car?
Salary sacrificing a car is an arrangement where you give up part of your pre-tax salary in exchange for a vehicle, usually through a novated lease. This reduces your taxable income, which can increase your take-home pay, but it also attracts Fringe Benefits Tax (FBT) in many cases. Understanding how this fits with the national full-time average salary helps you decide if it is worthwhile.
How salary sacrificing a car works
Under a novated lease, your employer deducts car payments from your salary before tax. The amount sacrificed is not subject to income tax or Medicare levy, so you save tax at your marginal rate. However, the car is a fringe benefit, and your employer may pass on the FBT cost to you. The net benefit depends on your tax bracket, the car's value, and the FBT rate (currently 20% of the car's statutory value for many vehicles).
The national full-time average as a reference
The national full-time adult ordinary-time average is $2,083.70 per week, or about $108,352 per year (ABS Average Weekly Earnings, May 2026). This is the site's line. If you earn this amount, you are in the 30% tax bracket for 2026–27 (taxable income between $45,001 and $135,000). Sacrificing $15,000 per year would save you about $4,800 in tax and Medicare levy, but you would also need to cover FBT. The actual take-home effect varies.
For comparison, the full-time median is about $90,532, and the national minimum wage from 1 July 2026 is $52,255 per year (Fair Work). Someone on the average is well above the median and minimum, so salary sacrificing a car is more feasible. Place a salary on the line to see where your pay sits.
Take-home pay sketch for an average earner
Consider a resident earning the average $108,352. After the tax-free threshold ($18,200), the next $26,800 is taxed at 15%, then $90,000 at 30%, and so on. Without salary sacrifice, the tax (including Medicare levy) is roughly $24,000–$25,000, leaving about $83,000–$84,000 take-home. If you sacrifice $15,000, your taxable income drops to $93,352, reducing tax by about $4,800. But you must pay the car lease and FBT from the sacrificed amount, so your actual disposable income may be lower. The net benefit is modest for this bracket.
State variations
State full-time averages differ. For example, New South Wales averages about $109,658, Victoria $106,137, and Western Australia $115,825. In the Australian Capital Territory, the average is $119,090. Higher earners in the 37% or 45% brackets save more per dollar sacrificed. States and territories shows how your location compares.
Other considerations
Salary sacrificing a car does not reduce your superannuation guarantee, which is based on ordinary time earnings before sacrifice. It may also affect your eligibility for some government benefits if your reportable income changes. Always check with a salary packaging provider or the ATO for your specific situation.
FAQs
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