Novated lease vs salary sacrifice: What moves your pay above or below the line
When you compare a novated lease and salary sacrifice, you are really comparing two sides of the same coin. Salary sacrifice is the broad concept of swapping pre-tax salary for a benefit; a novated lease is a common way to sacrifice salary for a car. Both reduce your taxable income, which changes your take-home pay and how your salary stacks up against the national full-time average.
The national full-time average and your gross salary
The site’s line is drawn from the ABS Average Weekly Earnings, May 2026: $2,083.70 a week, or about $108,352 a year (multiplied by 52). This is the average gross ordinary-time earnings for full-time adults. Your gross salary – the figure before any salary sacrifice – is what the ABS measures. So if your gross salary is $120,000, you sit above the line. If it is $90,000, you sit below.
But salary sacrifice changes your effective cash pay. If you sacrifice $15,000 for a novated lease, your taxable income drops to $105,000. Your take-home pay (after tax) will be lower than someone earning $105,000 without sacrifice, because you still pay for the car. However, the tax saving means you keep more of your cash than if you had paid for the car with after-tax dollars.
How salary sacrifice shifts your position relative to the average
Consider the full-time median of $90,532 (ABS Employee Earnings, August 2025). If your gross salary is $95,000, you are above the median but below the average. Adding a novated lease of $10,000 reduces your taxable income to $85,000 – now below the median. Your take-home cash is less, but you have a car. The question is whether the car’s value makes up for the drop in cash income. That depends on your personal circumstances.
For someone on the national minimum wage ($52,255 a year from 1 July 2026), salary sacrifice is rarely worthwhile because the tax saving is small and you need the cash for living expenses. The Fair Work minimum wage is $26.44 an hour, and award minimums rose 4.75% in 2026. Sacrificing part of that wage would push your cash income below the minimum, which is generally not allowed – you must still receive at least the minimum wage in cash after sacrifice.
The role of tax brackets and FBT
Your tax bracket determines how much you save. In 2026–27, the ATO 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 that. Plus the Medicare levy of 2%. If you are in the 30% bracket, each dollar sacrificed saves 30 cents in tax plus 2 cents Medicare levy – a 32% saving. In the 37% bracket, you save 39%.
But a novated lease attracts fringe benefits tax (FBT) unless the car is used predominantly for work. The ATO provides a statutory formula based on the car’s value and the number of kilometres travelled. If FBT applies, your employer may pass on the cost, reducing your saving. Some employers use a “salary packaging” arrangement that includes FBT in the calculation, so your net benefit is smaller.
Comparing novated lease to other salary sacrifice options
Salary sacrifice is not limited to cars. You can sacrifice into superannuation (up to the concessional cap of $30,000 in 2026–27), which directly boosts your retirement savings and reduces taxable income. That is often more tax-effective than a novated lease because super contributions are taxed at only 15% inside the fund, and there is no FBT. However, you cannot access that money until retirement.
Other common sacrifices include laptops, parking, and childcare. Each has different tax treatment. The ATO publishes guidelines, but the key point is that any salary sacrifice reduces your gross cash income, which affects how your pay compares to the national average.
What moves your pay above or below the line
Your gross salary is the primary factor. If it is above $108,352, you are above the line. Salary sacrifice does not change that gross figure for the ABS measure – it only changes your taxable income. So a person earning $110,000 with a $20,000 novated lease still has a gross salary of $110,000 and sits above the average, even though their cash take-home is lower.
But if you look at effective cash pay (after sacrifice and tax), you might fall below the average. For example, someone earning $108,352 (exactly the average) who sacrifices $10,000 will have a taxable income of $98,352. After tax (30% bracket), their take-home cash is about $68,846 plus the car benefit. Compare that to someone earning $98,352 without sacrifice: their take-home cash is about $68,846 plus they have no car. The sacrifice gives you a car but less cash. Whether that is better depends on your need for a car.
State averages and your location
The national average hides state differences. The ABS data shows the ACT has the highest full-time average at $119,090, while Tasmania has the lowest at $96,008. If you live in the ACT and earn $110,000, you are below the ACT average but above the national average. Salary sacrifice might help you reduce tax, but it won’t change your gross salary relative to the state figure.
For more on how your salary compares by state, see our States and territories page. You can also Place a salary on the line to see where it sits against the national average.
Making the decision
Choosing between a novated lease and other salary sacrifice options depends on your salary level, tax bracket, and need for a car. If your gross salary is well above the average, the tax savings from a novated lease can be significant. If you are near the median or minimum wage, the cash flow impact may be too high. Always consider the FBT implications and consult a tax professional.
For more guides on salary packaging and pay comparisons, visit our Guides section. To understand how the figures are set, see How the figures are set.
Summary
- The national full-time average is $108,352 (ABS Average Weekly Earnings, May 2026).
- Salary sacrifice reduces taxable income but not gross salary, so your position relative to the average is based on your gross pay.
- Novated leases are a common form of salary sacrifice for cars, subject to FBT.
- Tax savings are higher in higher brackets; minimum wage earners see little benefit.
- State averages vary; check your local figure.
Your pay moves above or below the line primarily because of your gross salary. Salary sacrifice changes your cash flow and net benefit, but the line remains fixed on your pre-sacrifice earnings.