Salary sacrifice EV: How it changes your take-home pay

Gross salary, package, and take-home: what's the difference?

When you see a job ad, it often shows a gross salary – the amount before tax and other deductions. But what actually lands in your bank account is your take-home pay, which is gross salary minus income tax, the Medicare levy, and any salary sacrifice amounts. A salary package can include benefits like a car, super, or an electric vehicle (EV) that you receive instead of cash. Mixing these up can leave you surprised when your pay is lower than expected.

This guide explains how salary sacrifice works, using the example of an electric vehicle (EV) – a popular choice under salary sacrifice arrangements – and shows you how to estimate your net pay.

What is salary sacrifice?

Salary sacrifice (also called salary packaging) is an agreement between you and your employer. You forgo part of your before-tax salary, and your employer provides a benefit of similar value instead. The Australian Taxation Office explains that this reduces your taxable income, so you pay less tax . Common benefits include cars, super contributions, and now electric vehicles.

How salary sacrifice EV works

If you salary sacrifice an EV, your employer pays the lease or purchase cost from your pre-tax salary. Your taxable income drops by that amount. You still pay tax on the remaining salary, but at a lower rate. The benefit is that you get a new car without using after-tax dollars. However, you cannot claim a tax deduction for the car expenses because your employer paid them.

From 1 April 2027, work-related items provided through salary sacrifice will no longer be exempt from fringe benefits tax, but EVs may still have favourable treatment under current rules. Check with your employer or the ATO for the latest.

How salary sacrifice affects your take-home pay

Your take-home pay is what remains after tax, Medicare levy, and any salary sacrifice deductions. The ATO's tax withheld calculator can help your employer work out the correct amount to withhold each pay period .

Example: $65,000 salary with an EV salary sacrifice

Using the ATO's example from their salary sacrificing page, consider Sam earning $65,000 annually. Without salary sacrifice, after income tax ($10,288) and Medicare levy ($1,300), plus car expenses of $11,500, Sam's net disposable income is $41,912. With a salary sacrifice arrangement for a car (including an EV), Sam's taxable income drops to $47,647, tax is $5,082, Medicare is $953, and no car expenses are paid from after-tax income. Net disposable income becomes $41,612 – slightly less. But if Sam also makes an employee contribution of $7,000, the net disposable income rises to $43,593. The outcome depends on the structure.

Tax rates and Medicare levy for 2026–27

For the 2026–27 income year, resident tax rates are:

• $0 – $18,200: Nil
• $18,201 – $45,000: 15c for each $1 over $18,200
• $45,001 – $135,000: $4,020 plus 30c for each $1 over $45,000
• $135,001 – $190,000: $31,020 plus 37c for each $1 over $135,000
• Over $190,000: $51,370 plus 45c for each $1 over $190,000

Plus the Medicare levy of 2% of taxable income. If your taxable income is below $28,011 (single), you pay a reduced levy or none; above $35,013 you pay the full 2%. The Moneysmart website provides a calculator to estimate your after-tax income .

Super guarantee and salary sacrifice

Your employer must still pay the 12% super guarantee on your ordinary time earnings, even if you salary sacrifice some of your salary. Salary sacrificed super contributions are treated as employer contributions and are not fringe benefits. They count towards the concessional contributions cap ($27,500 for 2026–27).

Common mix-ups to avoid

• Gross salary vs package value: A job ad might say "$80,000 package including super". Your gross salary is less than $80,000 because super is on top. Always clarify the base salary.
• Salary sacrifice is not a deduction: You don't claim it on your tax return; it reduces your salary before tax is calculated.
• Take-home pay is not just tax: Medicare levy, salary sacrifice, and employee contributions all reduce what you receive.
• Benchmark figures: The national minimum wage is $26.44 per hour or $1,004.90 per week (from 1 July 2026). Full-time adult ordinary time earnings average $2,083.70 per week. These are before tax and any salary sacrifice.

How to estimate your own take-home pay

Use the Take-home pay calculator on this site, or the ATO's tax withheld calculator. Enter your gross salary, then subtract any salary sacrifice amount. Apply the tax rates and Medicare levy. Remember that salary sacrifice may also affect government benefits, child support, and study loan repayments.

Final thoughts

Salary sacrifice for an EV or other benefits can reduce your tax bill, but it also reduces your cash take-home pay. The net benefit depends on your individual circumstances. Always read the fine print of your salary package and consider using a Salary packaging guide to compare scenarios.

For more details, see our Tax and Medicare page or the Clearance tool to check your withholding.