How a salary sacrifice new car can boost your take-home pay

How a salary sacrifice new car affects the amount that reaches your account

When you compare job offers, the gross salary is only part of the story. What really matters is the amount that lands in your bank account after tax, the Medicare levy, and any salary sacrifice arrangements. One popular option is a salary sacrifice new car – where you trade some of your pre-tax salary for your employer providing a vehicle and covering its running costs. This can reduce your taxable income and, if structured well, increase your net disposable income.

Understanding the numbers from the Australian Taxation Office

The Australian Taxation Office provides a clear example of how a salary sacrifice new car works. Imagine you earn $65,000 a year and your employer offers a $35,000 car with $11,500 in annual running expenses (registration, insurance, fuel, maintenance). The ATO calculates three scenarios for the 2025–26 year:

• No packaging: You receive the full $65,000 salary, pay tax and Medicare, and then pay the $11,500 car expenses yourself. Your net disposable income is $41,912.
• Packaging without employee contribution: You sacrifice $17,353 of salary, your taxable income drops to $47,647, and your employer pays the car costs. After tax and Medicare, you have $41,611.96 – slightly less than no packaging because of FBT.
• Packaging with employee contribution: You sacrifice only $4,145, your taxable income is $60,855, and you make a $7,000 after-tax employee contribution to reduce your employer's FBT. Your net disposable income rises to $43,593.40 – over $1,600 more than no packaging.

This shows that a salary sacrifice new car can boost your take-home pay, but only if you make an employee contribution. The employee contribution effectively reduces the fringe benefits tax your employer pays, leaving more of your income in your pocket.

Comparing job offers using net disposable income

When you receive a job offer, ask whether the employer offers salary packaging for a new car. If they do, request a personalised quote from their salary packaging provider. Compare the net disposable income – what you have left after tax, Medicare, and any employee contributions – against the offer without packaging. Also consider that packaging reduces your taxable income, which may lower your Medicare levy surcharge if you earn above the thresholds ($28,011 and $35,013 for singles) and affect other obligations like HELP repayments.

Remember that super is not affected: your employer must still pay the super guarantee (12% from 1 July 2026) on your original salary, not the sacrificed amount. And if you choose an eligible electric car, the FBT exemption may apply, making the arrangement even more tax-effective, as noted by Moneysmart.

Key considerations for your take-home pay

• Employee contributions are crucial: Without them, a salary sacrifice new car may not improve your net position. The ATO example shows a slight drop. Always check if your employer allows contributions.
• FBT changes from 1 April 2027: Work-related items like phones and laptops will no longer be exempt from FBT when salary sacrificed, but cars remain subject to existing rules.
• Impact on government benefits: Salary sacrifice reduces your adjusted taxable income, which can affect child support, family tax benefit, and other means-tested payments. Factor this in.
• Use the Take-home pay calculator: Model your specific salary and packaging options to see the exact effect on your bank account.

For a deeper dive into how salary packaging works, see our Salary packaging guide. And always check the latest ATO guidance, as rules can change.

Final thought

A salary sacrifice new car can be a valuable part of your total remuneration package. By focusing on net disposable income rather than gross salary, you can make a smarter choice between job offers. The ATO's example proves that with the right structure – especially an employee contribution – you can end up with more money in your pocket each fortnight.