Salary sacrifice EV and the national average
If you are considering a salary sacrifice arrangement for an electric vehicle (EV), you are likely weighing how it changes your weekly budget against a benchmark like the national full-time average. The ABS Average Weekly Earnings, May 2026, puts the national full-time adult ordinary-time average at $2,083.70 a week, or about $108,352 a year. That is the line this site uses. Understanding where your pay sits after a salary sacrifice EV arrangement means looking at the trade-off between a lower taxable income and the non-cash benefit of the car.
How salary sacrifice works for an EV
Salary sacrifice is an agreement with your employer to forgo part of your pre-tax salary in exchange for a benefit, such as a novated lease on an electric car. The lease payments, running costs, and any fringe benefits tax (FBT) are deducted from your gross pay before tax is calculated. Because the deduction comes out of pre-tax dollars, your taxable income falls, and you pay less income tax and Medicare levy. The ATO sets the rules for what counts as a legitimate salary sacrifice arrangement, and for EVs that meet the eligibility criteria, the FBT exemption applies from 1 July 2022.
Under the FBT exemption, eligible electric cars (those below the luxury car tax threshold and not powered by petrol or diesel) are exempt from FBT when provided for private use. This means your employer does not need to pay FBT on the car, and the cost of the lease can be lower than for a conventional vehicle. The exemption applies to cars first used and held on or after 1 July 2022, and it is available for both new and used EVs that meet the criteria.
Where the average sits
The national full-time average of $108,352 is a useful reference point. If your salary is around that figure, salary sacrificing an EV could reduce your taxable income to, say, $95,000 or $100,000 depending on the lease amount. Using the 2026–27 resident tax rates, the tax on $108,352 would be:
- Nil on the first $18,200
- 15% on the next $26,800 (up to $45,000) = $4,020
- 30% on the next $90,000 (up to $135,000) = $27,000 on the portion from $45,001 to $108,352 (that is $63,352 at 30% = $19,005.60)
- Total tax before Medicare: $4,020 + $19,005.60 = $23,025.60
- Plus Medicare levy 2% on $108,352 = $2,167.04
- Total tax and Medicare: $25,192.64
If your taxable income drops to $95,000 after salary sacrifice, the tax would be:
- Nil on $18,200
- 15% on $26,800 = $4,020
- 30% on $50,000 (from $45,001 to $95,000) = $15,000
- Total tax before Medicare: $19,020
- Medicare levy 2% on $95,000 = $1,900
- Total: $20,920
That is a saving of about $4,272 in tax and Medicare. Your take-home pay would increase by that amount, but remember your employer is deducting the lease payments from your gross salary. So your net pay after the lease deduction may be lower than before, but you are also receiving the car and its running costs. The net effect on your weekly cash flow depends on the lease amount and the tax saving.
Comparing with state averages
Your state also matters. The full-time averages vary: New South Wales $109,658, Victoria $106,137, Queensland $106,064, South Australia $102,450, Western Australia $115,825, Tasmania $96,008, Northern Territory $103,173, and the Australian Capital Territory $119,090. If you live in a state with a higher average, your salary sacrifice may push you into a lower bracket relative to your state peers. For example, in Western Australia, the average is $115,825, so a salary sacrifice that reduces taxable income to $105,000 still leaves you below the state average but with a lower tax bill. You can explore states and territories for more detail.
The role of the minimum wage and medians
It is important to keep the averages distinct from other benchmarks. The national minimum wage from 1 July 2026 is $26.44 an hour, $1,004.90 a week, or about $52,255 a year on 38 hours. That is well below the average, and salary sacrifice for an EV is typically only feasible for workers earning enough to cover the lease payments. The full-time median of about $90,532 (ABS Employee Earnings, August 2025) is closer to where many salary sacrifice arrangements might be considered. At the median, the tax saving from reducing taxable income to, say, $80,000 would be smaller but still noticeable. The all-employees median is about $74,100, which includes part-time and casual workers.
Take-home sketch for a resident on the average
Imagine a resident earning exactly the national full-time average of $108,352. They enter a salary sacrifice arrangement for an EV with a lease cost of $15,000 per year (including running costs). Their taxable income becomes $93,352. Using the 2026–27 tax rates:
- Tax on $93,352: nil on $18,200; 15% on $26,800 = $4,020; 30% on $48,352 (from $45,001 to $93,352) = $14,505.60; total $18,525.60
- Medicare levy 2% on $93,352 = $1,867.04
- Total tax and Medicare: $20,392.64
- Compared to $25,192.64 without sacrifice, saving $4,800.
Their take-home pay (after tax and Medicare) would be $108,352 - $25,192.64 = $83,159.36 without sacrifice. With sacrifice, their gross salary is still $108,352, but the lease of $15,000 is deducted pre-tax, so their taxable income is $93,352. After tax and Medicare of $20,392.64, their net pay is $72,959.36, but they also receive the car and its running costs worth $15,000. So their total compensation (cash plus car) is $87,959.36, which is higher than $83,159.36. The cash in hand is lower, but the car benefit makes up the difference.
This sketch uses the on-site average and tax brackets. For a more personalised calculation, you can place a salary on the line to see how your own figures compare.
What the ATO says
The ATO provides guidance on salary sacrifice arrangements, including the requirement that the arrangement be entered into before the income is earned and that the benefit be genuinely for the employee's use. For EVs, the FBT exemption is automatic for eligible cars, but you must ensure the car meets the criteria: it must be a zero or low emissions vehicle (battery electric, hydrogen fuel cell, or plug-in hybrid with CO2 emissions below the threshold) and its first retail price must be below the luxury car tax threshold for fuel-efficient cars ($89,332 for 2025–26, indexed). The exemption applies to the car's private use portion, so if you use the car for work, the exempt amount is reduced proportionally.
Other considerations
Salary sacrificing an EV can also affect your superannuation. Your employer's compulsory super contributions are based on your ordinary time earnings, which may be reduced by the salary sacrifice amount. Check your employment contract or award to see if super is calculated on the pre-sacrifice salary. Some employers continue to pay super on the original salary, but it is not required. The Fair Work Act does not mandate super on sacrificed amounts unless the award or agreement says so.
Also, the FBT exemption is currently legislated until 31 March 2027, but the government has indicated it will be extended. Keep an eye on ATO updates.
For more context on how salary sacrifice compares across industries, see our industry medians page. You can also read guides on salary packaging and EV benefits.
Summary
Salary sacrificing an EV can be a tax-effective way to access a new car, especially if you earn around the national full-time average of $108,352. The reduction in taxable income lowers your tax bill and Medicare levy, and the FBT exemption makes the arrangement cheaper for your employer. Your take-home pay in cash will be lower, but your total compensation (cash plus car value) can be higher. Always check the ATO rules and your employer's policy before entering an agreement.