How EV Salary Sacrifice Affects Your Position on the Salary Index

What is EV Salary Sacrifice?

EV salary sacrifice is a popular way to reduce your taxable income by packaging an electric vehicle through your employer. Under a novated lease, you agree to forego part of your pre-tax salary to cover the lease payments. This lowers your taxable income, which can save you tax at your marginal rate. For example, if you earn $120,000 and sacrifice $20,000 for an EV, your taxable income drops to $100,000. At the 2026–27 tax rates (nil to $18,200, 15% to $45,000, 30% to $45,000–$135,000), you save tax on the $20,000 at 30% (plus 2% Medicare). Your take-home pay increases, but your gross salary index remains based on your pre-sacrifice gross.

How the Salary Index Measures Your Pay

The Australian salary index uses a national line of full-time adult ordinary-time earnings. The index 100 equals $108,352 annualised (from the Australian Bureau of Statistics Average Weekly Earnings, May 2026). This is your gross before any salary packaging. So if your pre-sacrifice salary is $120,000, your index is about 110.8. This means you earn 10.8% above the national line. Even after you sacrifice $20,000 for an EV, your index remains 110.8. The index is a benchmark for your earning level, not your take-home.

Impact on Super and Tax

Your super guarantee is 12% of your ordinary time earnings from 1 July 2026. If you salary sacrifice for an EV, your ordinary time earnings reduce, so your super contributions drop. For instance, if your ordinary time earnings fall from $120,000 to $100,000, your super goes from $14,400 to $12,000. However, the tax saved can be used to offset this. The maximum super contribution base is $270,830. Also, the national minimum wage is $26.44/hr (index 48.2), and award minima rose 4.75% from 1 July 2026. Your salary sacrifice arrangement must comply with your award or agreement.

Where Your Pay Sits on the Index

To find your index, divide your annual gross ordinary-time earnings by $108,352 and multiply by 100. For example, if you earn $150,000 before sacrifice, your index is 138.5. After sacrificing $30,000 for an EV, your taxable income is $120,000, but your index stays 138.5. This shows you earn 38.5% above the national line. The index helps compare across states and industries. For instance, the mining industry index is 154.7, while retail trade is 75.9. Your personal index may differ.

Considerations for EV Salary Sacrifice

EV salary sacrifice can be beneficial if you drive a lot and want to reduce tax. However, it reduces your super and may affect your borrowing capacity. Also, the fringe benefits tax (FBT) may apply, but electric vehicles are exempt from FBT if they meet the criteria (car value below the luxury car threshold for fuel-efficient vehicles). This exemption makes EV salary sacrifice more attractive. Always check with your employer and a tax professional.

Internal Links

For more on how the index works, see how the index works. To compare your pay across states, visit states. For other topics, see topics.

Conclusion

EV salary sacrifice changes your taxable income but not your salary index position. Your index is based on your gross ordinary-time earnings before sacrifice. Understanding this helps you see where your pay sits against the national line. Use the index to benchmark your earning level.