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How a salary sacrifice novated lease affects your pay index by state and industry
Understand how a salary sacrifice novated lease changes your take-home pay and how it compares to the national index, with state and industry differences explained.
A salary sacrifice novated lease does not change your gross ordinary-time earnings index, but it lowers your taxable income, making it more valuable in higher-index states and industries.
How a salary sacrifice novated lease fits into the Salary Index
A salary sacrifice novated lease is an arrangement where you lease a car through your employer and pay for it from your pre-tax salary. This reduces your taxable income, so you pay less tax and Medicare levy. The lease cost and FBT are paid from pre-tax, so your take-home pay is higher than if you paid from post-tax. The Salary Index measures gross ordinary-time earnings before any sacrifice. Your index stays the same. The index is 100 = $108,352 annualised. Your personal index is based on your gross pay. For example, if you earn $120,000, your index is about 110.7. A novated lease doesn't change that. But it changes your net income.
How state differences affect the value
The Salary Index shows average earnings by state. ACT is highest at 109.9, Tasmania lowest at 88.6. If you live in ACT, your gross pay is likely higher, so your marginal tax rate is higher. A salary sacrifice novated lease saves more tax. In Tasmania, average pay is lower, so the tax saving is smaller. The lease cost is the same, but the net benefit is bigger in higher-index states. For instance, someone on $120,000 in ACT saves 37% on the lease cost, while someone on $80,000 in Tasmania saves 30%. The difference matters.
Industry differences and the lease
Industries also vary. Mining index 154.7, Retail 75.9. A miner on $160,000 saves 45% on lease costs, while a retail worker on $80,000 saves 30%. The lease is the same, but the tax saving is much larger in high-index industries. Professional services (114.7) also benefit. Low-index industries like Accommodation (72.5) have lower average earnings, so the lease still saves tax, but less. The Salary Index helps you see where your industry sits. If your industry is above 100, you are above average. A novated lease is more valuable there.
How to use the index with a novated lease
The index is a benchmark. Your gross pay divided by $108,352 times 100 gives your index. For example, $130,000 gives index 120. A novated lease doesn't change that. But your take-home pay after lease is higher than if you paid post-tax. The index is useful to see where you stand nationally. If you are in a high-index state or industry, the lease is more beneficial. If you are in a low-index one, it still helps, but less.
Tax and super considerations
Salary sacrifice reduces your super guarantee base? No, super is paid on your ordinary-time earnings before sacrifice. So your super stays the same. The lease cost is paid from pre-tax, but FBT may apply. The Salary Index doesn't include FBT. The lease reduces your taxable income, so you pay less tax. The Medicare levy is 2% on taxable income, so that also reduces. The index is gross, so it doesn't change. But your net income is higher.
Examples across states and industries
Consider a worker in ACT (index 109.9) earning $120,000. Their marginal rate is 37%. A novated lease costing $15,000 per year saves $5,550 in tax. In Tasmania (index 88.6) earning $80,000, marginal rate 30%, same lease saves $4,500. The difference is $1,050. Industry: Mining (154.7) earning $160,000, marginal 45%, saves $6,750. Retail (75.9) earning $70,000, marginal 30%, saves $4,500. The lease is the same, but the benefit varies.
Internal links for more detail
See how the index works for the calculation. Compare states and industries to see where you fit. The Salary Index shows the national line. For more on pay guides, see pay guides.
Caveats
The index is a benchmark, not a quote for your job. Awards can set higher pay. The lease benefit depends on your personal tax rate and FBT. The index uses gross ordinary-time earnings, not total remuneration. Salary sacrifice can also affect some government benefits. Always check with a tax professional.
Conclusion
A salary sacrifice novated lease doesn't change your Salary Index, but it changes your take-home pay. The value is greater in high-index states and industries because of higher marginal tax rates. Use the index to understand where you stand nationally, and consider your state and industry when deciding on a novated lease.
Questions people ask
Does a salary sacrifice novated lease change my pay index?
No. The Salary Index measures gross ordinary-time earnings before any salary sacrifice. Your index stays the same regardless of a novated lease. However, salary sacrifice lowers your taxable income, which can reduce your tax bill and Medicare levy, so your take-home pay may be higher than someone on the same gross pay without salary sacrifice.
How do state differences affect the value of a salary sacrifice novated lease?
States with higher average earnings (like ACT, index 109.9) tend to have more workers in higher tax brackets, making salary sacrifice more valuable. In lower-index states (Tasmania, 88.6), average earnings are lower, so the tax savings from salary sacrifice is smaller. The lease cost and FBT still apply, but the net benefit is greater where your marginal rate is higher.
Which industries benefit most from a salary sacrifice novated lease?
Industries with high average earnings (Mining index 154.7) or Professional services (114.7) often have workers in higher tax brackets, so salary sacrifice reduces tax more. In low-index industries like Retail (75.9) or Accommodation (72.5), average earnings are lower, so the tax savings are smaller. The lease itself is the same, but the tax benefit is less.