What Is Electric Vehicle Salary Sacrifice?
Electric vehicle salary sacrifice is a workplace benefit that allows you to pay for the use of an electric vehicle (EV) from your pre-tax salary. Instead of receiving your full gross salary and then paying for the car with after-tax dollars, you agree to reduce your salary by a set amount each pay period. In return, your employer provides the vehicle. Because the salary sacrificed amount is taken before income tax is calculated, your taxable income is lower, which can reduce the tax you pay.
The Australian Tax Office (ATO) currently provides a Fringe Benefits Tax (FBT) exemption for eligible electric vehicles. This exemption makes EV salary sacrifice particularly attractive because the value of the car benefit is not subject to FBT, unlike a conventional car. The exemption applies to battery electric vehicles, hydrogen fuel cell electric vehicles, and plug-in hybrid electric vehicles (with some conditions). The arrangement must meet certain criteria, such as the car being first made available for use on or after 1 July 2022 and having a first retail price below the luxury car tax threshold for fuel-efficient vehicles.
How the Arrangement Works
In a typical EV salary sacrifice arrangement, you and your employer agree on a salary reduction amount. That amount covers the lease or novated lease payments, running costs (such as electricity, insurance, registration, and maintenance), and any other fees. The salary sacrifice amount is deducted from your gross pay before tax. Your employer then pays for the vehicle and its costs from that pre-tax pool. At the end of the lease term, you may have the option to purchase the vehicle or enter a new arrangement.
Because the salary sacrificed amount reduces your taxable income, you pay less income tax and Medicare levy. However, your gross salary for the purpose of comparing to the national full-time average is your salary before the sacrifice. The site's line uses the ABS Average Weekly Earnings figure for full-time adult ordinary-time earnings, which is $108,352 per year (May 2026). Your pre-sacrifice salary is what determines where you sit on that line.
Where Does Your Pay Sit?
The national full-time average of $108,352 is a benchmark for full-time workers. If your pre-sacrifice salary is above this figure, you are earning more than the average full-time worker. If it is below, you are earning less. The median full-time salary is $90,532 (ABS Employee Earnings, August 2025), meaning half of full-time workers earn less than that and half earn more. The all-employees median is $74,100.
Electric vehicle salary sacrifice is often used by employees on middle to higher incomes, because the tax savings are larger when you are in a higher marginal tax bracket. For the 2026–27 income year, the 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. The Medicare levy of 2% applies to most taxpayers. If your pre-sacrifice salary falls into the 30% bracket or higher, the tax saving from salary sacrifice can be significant.
Comparing to State Averages
Your location also matters. The national average masks differences between states and territories. For example, the full-time average in the Australian Capital Territory is $119,090, while in Tasmania it is $96,008. If you are in a higher-average state, your salary might be closer to or above the national line. You can see how your salary compares across states on the States and territories page.
Minimum Wage and Award Rates
The national minimum wage from 1 July 2026 is $26.44 per hour, $1,004.90 per week, or about $52,255 per year on a 38-hour week. Award minimums rose by 4.75% from that date. If your salary is at or near the minimum wage, an EV salary sacrifice arrangement may not be practical because the sacrificed amount could reduce your take-home pay below the minimum wage floor. Employers must ensure that after salary sacrifice, you still receive at least the minimum wage or applicable award rate.
Considerations for Electric Vehicle Salary Sacrifice
Before entering an EV salary sacrifice arrangement, consider the following:
- Your salary level: The benefit is greater if you are in a higher tax bracket. Use the Place a salary on the line tool to see where your pre-sacrifice salary sits relative to the national average.
- FBT exemption: Ensure the vehicle meets ATO criteria for the FBT exemption. The exemption is currently legislated until 31 March 2027, but may be extended.
- Running costs: The salary sacrifice amount typically covers all running costs, so you avoid out-of-pocket expenses. However, if you leave your job, the arrangement may end and you could face residual payments.
- Impact on superannuation: Salary sacrifice reduces your gross salary, which may lower your employer's superannuation guarantee contributions (calculated on your ordinary time earnings). Check with your employer.
- Novated lease: Many EV salary sacrifice arrangements use a novated lease, which is a three-way agreement between you, your employer, and a leasing company.
For more detailed guidance, see the Guides section on salary packaging and electric vehicles.
Summary
Electric vehicle salary sacrifice is a tax-effective way to access an EV, but it does not have a single salary figure. Your own pre-sacrifice salary determines where you stand against the national full-time average of $108,352. If your salary is above the average, you are in a strong position to benefit from the tax savings. If it is below, the arrangement may still be worthwhile, but you should check that your after-sacrifice pay remains above minimum award rates. Use the site's tools to compare your salary and understand your position.