Can I salary sacrifice a car? How it affects your take-home pay when comparing job offers
The pay you take home depends on your salary, the benefit value, and whether you make employee contributions. There is no single figure; use the ATO example for a $65,000 salary to see the effect.
Comparing job offers: what reaches your account
When you compare two job offers, the headline salary is only part of the story. What matters is the amount that lands in your bank account after income tax, the Medicare levy, and any salary sacrifice arrangements. One common question is can I salary sacrifice a car? The answer can significantly change your take-home pay.
What is salary sacrificing a car?
Salary sacrificing, also called salary packaging, lets you swap part of your pre-tax salary for a benefit. For a car, your employer provides the vehicle and pays its running costs (registration, insurance, fuel, maintenance). In return, your taxable income drops by the sacrificed amount. The Australian Taxation Office explains that this reduces the tax you pay, but your employer may have to pay fringe benefits tax (FBT) on the car's value. Salary packaging is a key topic to understand before you accept an offer.
How it changes your take-home pay
The ATO gives a clear example for the 2025–26 year. Sam earns $65,000 and considers a car worth $35,000 with $11,500 in running costs. Without salary packaging, Sam pays $11,500 for the car from after-tax income, leaving net disposable income of $41,912. With salary sacrifice and no employee contribution, taxable income falls to $47,647, tax drops to $5,082, and net disposable income is $41,612 – slightly less. But if Sam makes an employee contribution of $7,000 (which reduces the FBT the employer pays), taxable income is $60,855, tax is $9,045, and net disposable income rises to $43,593. So the arrangement can boost your take-home pay if structured with employee contributions.
The role of FBT and electric cars
FBT is calculated on the taxable value of the car. For a car provided by your employer, the statutory method uses 20% of the car's cost regardless of distance. Your employer may ask you to make an employee contribution (from after-tax money) to lower the FBT they owe. There is currently an FBT exemption for eligible electric cars and associated expenses, which can make salary sacrificing an EV more attractive. Check the ATO's Cars and FBT page for details.
Comparing offers: look at net disposable income
When you have two job offers, one with a car package and one without, calculate your net disposable income – what you keep after tax, Medicare levy, and any employee contributions. The ATO's example shows that even with a lower taxable income, your net position can improve if the benefit replaces an expense you would otherwise pay with after-tax dollars. Use our Take-home pay calculator to model different scenarios.
Other considerations
Salary sacrificing a car can affect your super guarantee – your employer must still pay the full 12% super on your original salary, not the sacrificed amount. It may also impact the Medicare levy surcharge, study loan repayments, and some government benefits. The Medicare levy thresholds for singles are $28,011 and $35,013 – if your taxable income falls below these, you may pay a reduced levy or none at all. But full-time salaries typically exceed these, so you'll pay the full 2%.
Minimum wage and benchmarks
For context, the national minimum wage from 1 July 2026 is $26.44 per hour and $1,004.90 per week. The average full-time adult ordinary time earnings are $2,083.70 per week. These benchmarks help you see where your offer sits. Benchmarks are updated regularly.
Final thought
When you ask can I salary sacrifice a car, the answer is yes if your employer offers it and you set up an effective arrangement before you earn the income. But the real question is whether it improves your after-tax position. Compare offers using net disposable income, not just the salary figure. For more guidance, see our Guides on salary packaging and tax.
This is a general guide. Use the ATO's resources and consult a tax professional for your specific situation.
Questions
What does it mean to salary sacrifice a car?
You and your employer agree to reduce your pre-tax salary in exchange for the employer providing a car and paying its running costs. The car is a fringe benefit, and your employer may have to pay fringe benefits tax (FBT) on its value. You pay less income tax because your taxable income is lower, but your net disposable income may increase or decrease depending on the arrangement.
How does salary sacrificing a car affect my take-home pay?
Your take-home pay is your salary minus the sacrificed amount, income tax, and the Medicare levy. The ATO example for a $65,000 salary shows that without employee contributions, net disposable income is about $41,612, compared to $41,912 without packaging. With employee contributions of $7,000, net disposable income rises to $43,593. The effect depends on the benefit value, FBT, and whether you make contributions to reduce FBT.
Is salary sacrificing a car worth it for me?
It depends on your income, the car's value, and your employer's FBT obligations. For some, especially those with not-for-profit employers that have FBT concessions, it can be tax-effective. For others, the reduction in taxable income may be offset by FBT or loss of government benefits. Use the ATO's car FBT calculator and consider your total financial position before deciding.