How Salary Sacrifice New Car Affects Your Gross Pay, Super, and Tax

How Salary Sacrifice New Car Works

Salary sacrifice new car is an arrangement where you agree to forgo part of your pre-tax salary in exchange for the use of a new car, typically through a novated lease. This reduces your gross pay, which in turn affects your superannuation and tax. The Salary Index measures gross full-time adult ordinary-time earnings, with 100 equal to $108,352 per year (ABS Average Weekly Earnings, May 2026). When you salary sacrifice, your reported gross pay drops, so your personal index figure may be lower than your base salary index.

Impact on Gross Pay

Your gross pay is the amount you earn before any deductions. With salary sacrifice, your employer pays the car lease and running costs from your pre-tax salary, so your taxable income falls. For example, if your base salary is $108,352 (index 100) and you sacrifice $15,000 for a car, your new gross pay becomes $93,352, which is index 86.2. However, this is your ordinary-time earnings for super and tax purposes. The car benefit itself is not cash, but it is a non-cash benefit that may be subject to fringe benefits tax (FBT). Your employer may pass the FBT cost back to you, often through a post-tax deduction, which further reduces your take-home pay.

Impact on Super

Superannuation guarantee (SG) is 12% from 1 July 2026, calculated on your ordinary time earnings (OTE). If your salary sacrifice reduces your OTE, your employer's mandatory super contributions may decrease. Some employers calculate SG on your pre-sacrifice salary, but others use the reduced figure. Check your employment contract or award. The pay guides from Fair Work Ombudsman can help clarify award-specific rules. A lower super balance over time could affect your retirement savings, so weigh this against the immediate tax benefit.

Impact on Tax

Salary sacrifice reduces your taxable income, potentially moving you into a lower tax bracket. For 2026–27, resident tax rates (excluding Medicare) are: nil up to $18,200; 15% from $18,201 to $45,000; 30% from $45,001 to $135,000; 37% from $135,001 to $190,000; 45% above $190,000. Plus a 2% Medicare levy. If you are in the 30% bracket, sacrificing $15,000 saves $4,500 in tax, plus $300 in Medicare levy. However, FBT may apply. The ATO values the car benefit using the statutory formula, and the employer pays FBT at 47% (including Medicare levy). Many employers pass this cost to you as a post-tax deduction, which can reduce or eliminate the tax saving. For example, if the FBT on the car is $5,000, your net benefit might be only $200. Always model the numbers with your specific salary and car value.

Example Using the Salary Index

Consider a professional in NSW earning $109,658 (state index 101.2). They salary sacrifice a new car worth $20,000 per year in lease costs. Their new gross pay is $89,658, index 82.8. Tax saved at the 30% marginal rate is $6,000, but FBT on the car might be around $6,500 (depending on the car's value and usage). The net effect could be a small loss. However, if the car is used mostly for work, FBT may be reduced. The how the index works page explains that index figures are benchmarks, not personal quotes. Your actual outcome depends on your employer's FBT policy and your personal tax situation.

Key Considerations

• Award and agreement rules: Some modern awards limit salary sacrifice or require it to be voluntary. Check your award via industries or states pages.
• Super guarantee base: Confirm whether your employer calculates SG on pre- or post-sacrifice salary. If on pre-sacrifice, your super is protected.
• FBT exemption: If the car is a novated lease and you use it partly for work, you may reduce the taxable value. Keep a logbook.
• Government benefits: Lower adjusted taxable income may increase eligibility for Family Tax Benefit or reduce the Medicare levy surcharge.
• Professional advice: Salary sacrifice new car involves complex tax and super rules. Consult a tax professional or financial adviser.

In summary, salary sacrifice new car can lower your gross pay and tax, but the FBT cost and super impact must be considered. Use the topics page for more on salary packaging and fringe benefits.