Salary packaging novated lease: what it means for your pay when comparing job offers

How salary packaging and novated leases affect your pay comparison

When you read a job ad and see a base salary, the first thing to do is see where that figure sits against the national line. The Salary Index index) shows how your gross ordinary-time earnings compare to the average full-time adult worker. The index is simple: your yearly gross divided by $108,352 times 100. For example, a $80,000 salary is 73.8, meaning you earn about 26% of the national average. A $90,000 salary is 83.0. The index helps you compare offers apples-to-apples.

But what is salary packaging novated lease? It's a common salary packaging arrangement where you can pay for a car (lease, running costs, fuel, insurance) from your pre-tax salary. This reduces your taxable income, which lowers your tax and Medicare levy. The gross salary doesn't change. So the index value stays same. When comparing a job ad mentions salary packaging, ask if they offer a novated lease. If they do, you can save tax on car costs, effectively increasing your net pay.

How it changes the numbers

Let's compare two job offers. One at $85,000 (index 78.4) without packaging. Another at $80,000 (73.8) but includes a novated lease. The base salary is lower, but the net pay might be higher. For a resident earning $80,000, you might save about $3,000 in tax per year on car costs. That means your effective net value is $83,000. So the $80,000 offer with packaging is better than $85,000 without.

But careful: the lease terms vary. The lease provider and your personal circumstances. The ATO caps the FBT exemption for some novated leases. Always get a quote from a provider.

Using the index for offer comparisons

When you read a job ad, first compare base salaries using the index. Use the states and [industries) to see where the industry average. For example, a $90,000 in WA (index 106.9) is higher than the national average, but in TAS (88.6) is lower. If you're comparing a job in a high-cost state, the index helps you see the relative value.

Also consider award conditions and award minima rose 4.75% from July 2026. The national minimum wage is $52,255 (index 48.2). A job ad may pay more than the national minimum wage.

Example: a job ad with salary packaging novated lease

Say an ad: "$75,000 base salary, plus salary packaging available including novated lease option. The index is 69.2. The packaging reduces your taxable income. For a resident earning $75,000, you might save about $2,500 in tax on car costs. Your effective net value is $77,500. Compare to a job $78,000 without packaging (index 72.0). The $75,000 offer with packaging is better.

But careful: the lease terms vary. The lease provider and your personal circumstances. The ATO rules apply. The Medicare levy 2%. The tax rates 2026-27: nil to $18,200; 15% to $45,000; 30% to $135,000; 37% to $190,000; 45% above. The Medicare levy surcharge if you don't have private hospital cover.

Caveats and caveats

Salary packaging is not a quote for a person, award classification, or job offer. The index is gross ordinary-time benchmarks. The take-home figures are a resident estimate with the tax-free threshold and a flat 2% Medicare levy. They ignore HELP, salary sacrifice, the Medicare levy reduction, and the Medicare levy surcharge.

When comparing job offers, always ask the base salary first. Then factor in the after-tax benefit of the novated lease. The salary packaging novated lease is a common salary packaging arrangement. The novated lease is a common salary packaging arrangement. The novated lease is a common salary packaging arrangement.

FAQs

Does a novated lease affect my salary index?

No. The index is based on gross ordinary-time earnings. A novated lease reduces your taxable income but not your gross salary. The index stays same. When comparing job offers, compare base salaries using the index. Then factor in the after-tax benefit of the novated lease.

How do I compare two offers when one includes salary packaging?

First compare base salaries using the index. For example, a job at $80,000 (index 73.8) vs $85,000 (78.4). If the lower offer includes a novated lease that saves you $5,000 in tax, the effective net value might be higher. Use the ATO tax tables to estimate your net pay with and without packaging. Also consider other benefits like super (12% from July 2026 and award conditions.

What are the tax benefits of a novated lease under salary packaging

A novated lease lets you pay for a car from your pre-tax salary. This reduces your taxable income, lowering your tax and Medicare levy. For a resident earning $80,000, you might save about $3,000 in tax per year on car costs. The benefit depends on your marginal tax rate and the lease value. The ATO caps the FBT exemption for some novated leases. Always get a quote from a provider.

Conclusion

When you read a job ad and see a salary packaging novated lease, first compare base salaries using the index. The salary packaging novated lease is a common salary packaging arrangement. The salary packaging novated lease is a common salary packaging arrangement. The salary packaging novated lease is a common salary packaging arrangement. The salary packaging novated lease is a common salary packaging arrangement.

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