Salary sacrifice cars and your take-home pay
Salary sacrifice cars let you swap part of your pre-tax salary for the use of a vehicle. The arrangement is common in Australia, especially through a novated lease. Because the sacrificed amount is not subject to income tax, your taxable income falls, and your take-home pay can be higher than if you earned the same gross salary without the sacrifice. But how does this stack up against the national full-time average?
The national full-time average as a reference
The ABS Average Weekly Earnings for May 2026 put the national full-time adult ordinary-time average at $2,083.70 per week, or about $108,352 a year. This is the line on this site. If you earn this amount and salary sacrifice a car, your taxable income drops, and your take-home pay changes. The exact effect depends on how much you sacrifice, your tax bracket, and the fringe benefits tax (FBT) treatment.
How salary sacrifice works
Under a salary sacrifice arrangement, your employer reduces your gross salary by an agreed amount and uses that money to pay for the car lease, running costs, and any FBT. The ATO treats the car as a fringe benefit. Most employers use the statutory formula method to calculate FBT, which is based on the car's value and the number of kilometres travelled. The FBT amount is added to your reportable fringe benefits amount, which appears on your payment summary but does not directly reduce your take-home pay. Instead, the employer pays the FBT, and the cost is factored into the salary sacrifice amount.
For example, if you sacrifice $15,000 a year, your taxable income becomes $93,352. Using the 2026–27 resident tax rates (nil to $18,200, 15% to $45,000, 30% to $135,000, 37% to $190,000, 45% above that) plus the 2% Medicare levy, the tax saving is roughly the sacrificed amount multiplied by your marginal rate. At the 30% marginal rate, you save about $4,500 in tax plus $300 in Medicare levy, so your take-home pay increases by around $4,800 a year. However, you still pay the car costs from your after-tax pay, so the net benefit depends on whether the tax saving outweighs the costs.
Comparing to the average
The national full-time average of $108,352 is a gross figure. After tax and Medicare levy, a single resident without a salary sacrifice would take home about $79,000 (using the 2026–27 rates). With a $15,000 salary sacrifice, the take-home rises to about $83,800, but you must cover the car lease and running costs. If those costs are less than the $4,800 tax saving plus any employer contribution, you come out ahead. The Place a salary on the line tool lets you enter your gross salary and see the weekly and hourly equivalents, as well as the distance from the average.
State and territory differences
Full-time averages vary across Australia. For instance, the ACT average is about $119,090, while Tasmania is about $96,008. If you live in a state with a higher average, your marginal tax rate may be higher, making salary sacrifice more attractive. Conversely, in lower-average states, the tax saving is smaller. The States and territories page shows the full-time average for each jurisdiction.
Other considerations
Salary sacrifice reduces your superannuation guarantee because the employer calculates the 11.5% contribution on your reduced salary. Over time, this can lower your retirement balance. It may also affect your eligibility for some government benefits or child support assessments. The ATO requires that the arrangement be entered into before the income is earned, and you cannot salary sacrifice below the national minimum wage ($26.44 per hour, $1,004.90 per week from 1 July 2026).
The bottom line
Salary sacrifice cars can boost your take-home pay relative to the national average, but the benefit is not automatic. You need to compare the total cost of the lease, FBT, and running expenses against the tax saving. The national full-time average provides a useful benchmark. For more detail on how the figures are set, see How the figures are set.