Salary sacrificing a car: how it affects your position on the Australian salary index

Salary sacrificing a car and your salary index

Salary sacrificing a car is a common arrangement where you give up part of your pre‑tax salary in exchange for a vehicle, often through a novated lease. This can reduce your taxable income and increase your take‑home pay, but it also raises questions about where your pay sits on the Australian salary index.

What is the salary index?

The Salary Index measures your gross yearly earnings against the national line. An index of 100 equals full‑time adult ordinary‑time earnings, which the Australian Bureau of Statistics sets at $2,083.70 per week, or $108,352 per year (May 2026). Your personal index is your annual gross salary divided by $108,352, multiplied by 100. For example, the national minimum wage from 1 July 2026 gives an index of 48.2.

How salary sacrificing a car fits in

When you salary sacrifice a car, your employer reduces your cash salary by the agreed amount and provides the car benefit instead. The Australian Bureau of Statistics counts salary sacrifice arrangements as part of gross earnings. So your gross earnings for the index remain the same – the car benefit is included. Your salary index does not change because of the sacrifice.

However, your taxable income is lower, which can move you into a lower tax bracket or reduce the amount of tax you pay. 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; and 45% above $190,000. The Medicare levy adds 2%. Salary sacrificing a car can save you thousands in tax, depending on your marginal rate.

Where your pay sits on the index

Your position on the index depends on your total gross earnings, including any salary sacrifice. If your gross earnings are at the national average, your index is 100. If you earn less, your index is lower. For instance, someone on the national minimum wage has an index of 48.2. State benchmarks vary: New South Wales sits at 101.2, Victoria at 98, Queensland at 97.9, South Australia at 94.6, Western Australia at 106.9, Tasmania at 88.6, the Northern Territory at 95.2, and the ACT at 109.9. Industry indices also differ – Mining leads at 154.7, while Accommodation and food services is 72.5.

Does salary sacrificing change your index?

No. Because the car benefit is included in gross earnings, your index stays the same whether you sacrifice or not. But if you only look at your cash salary, you might think your index is lower. For example, if your gross earnings are $100,000 and you sacrifice $10,000 for a car, your cash salary is $90,000, but your gross earnings are still $100,000. Your index is 92.3, not 83.1. The how the index works page explains this in more detail.

Practical considerations

Salary sacrificing a car can be a smart way to manage your tax, but it has trade‑offs. Super guarantee contributions are usually based on your reduced cash salary unless your employer agrees to pay super on the sacrificed amount. With the super guarantee at 12% from 1 July 2026, a lower cash salary could mean smaller super contributions over time. Also, salary sacrificing may affect your eligibility for the low‑income tax offset or other government payments.

Awards and enterprise agreements may have rules about salary sacrificing. The Fair Work Ombudsman provides guidance on how salary sacrifice interacts with minimum wages and award conditions. Always check your award or agreement before entering a salary sacrifice arrangement.

Using the index to compare

The salary index is a useful tool to see where your total remuneration sits against national benchmarks. Whether you salary sacrifice a car or not, your index reflects your full gross earnings. To compare your position, use the states and industries pages to see typical indices for your location and field. You can also explore topics related to pay and benefits.

Take‑home pay vs index

Remember that the index is based on gross ordinary‑time earnings, not what you actually take home. Salary sacrificing a car can boost your take‑home pay because you pay less tax, but your index remains unchanged. For a resident with the tax‑free threshold and Medicare levy, take‑home pay on $100,000 gross is roughly $75,000 after tax (ignoring HELP, salary sacrifice, and other adjustments). If you sacrifice $10,000, your taxable income drops to $90,000, and take‑home pay rises to about $68,500 – a saving of around $3,500 in tax. Your index stays at 92.3.

Final thoughts

Salary sacrificing a car is a legitimate way to reduce your tax bill, but it does not alter your salary index. Your index is a measure of your total gross earnings, which includes the value of the car benefit. Use the index to understand where your pay sits nationally, and consider salary sacrificing as a separate strategy to improve your cash flow. For more details, see the pay guides for award‑specific information.