How salary sacrifice for an electric car fits on the Australian salary index

What is salary sacrifice for an electric car?

Salary sacrifice is an arrangement where you agree to give up part of your pre-tax salary in exchange for a benefit provided by your employer. When the benefit is an electric car, you effectively pay for the car (including running costs) from your gross salary before income tax is deducted. This reduces your taxable income, which can lower the tax you pay. Under current Australian tax rules, some electric cars may attract concessional fringe benefits treatment, but the specifics depend on the vehicle, the employer’s policy, and whether the car meets eligibility criteria.

It is important to understand that salary sacrifice does not change the gross earnings figure that appears on your payslip or that is reported to the Australian Bureau of Statistics. Your gross salary remains the same; only your taxable income is reduced. This distinction matters when you want to know where your pay sits on the national salary index.

The salary index and gross earnings

The Salary Index is a simple tool that compares your yearly gross ordinary-time earnings to the national line. The national line is set at 100, which corresponds to the ABS Average Weekly Earnings figure for full-time adult ordinary-time earnings. In May 2026 that figure was $2,083.70 per week, annualised to $108,352. If your gross salary is exactly $108,352, your index is 100. If you earn $80,000, your index is about 73.8; if you earn $130,000, your index is about 120.0.

The index is a gross benchmark. It does not account for salary sacrifice, superannuation, tax, or other deductions. That is why it is useful for comparing earning power across jobs, industries, and states, regardless of how you structure your pay.

Where does salary sacrifice fit in?

When you enter a salary sacrifice arrangement for an electric car, your employer deducts the car’s cost from your pre-tax salary. Your gross salary for index purposes stays the same. For example, suppose you earn $110,000 gross per year. Your index is about 101.5. You decide to salary sacrifice $15,000 for an electric car. Your taxable income becomes $95,000, but your index remains 101.5 because the gross figure has not changed.

This means the index is not a measure of your take-home pay or the value of your salary sacrifice benefit. Instead, it tells you where your base earning power sits relative to the national average. If you are considering a job that offers salary sacrifice for an electric car, look at the gross salary first. A higher gross salary gives you a higher index, which generally means more earning power even after the sacrifice.

Using the index to compare offers

Imagine you have two job offers. Offer A has a gross salary of $95,000 (index 87.7) and includes salary sacrifice for an electric car. Offer B has a gross salary of $105,000 (index 96.9) but no salary sacrifice. Which is better? The index helps you see that Offer B has higher earning power. However, you also need to consider the net benefit of the car. If the car in Offer A saves you significant tax, the after-tax position might be closer. The index gives you a starting point for comparison.

You can also use the index to see how your gross pay compares to industry benchmarks. For instance, the industries page shows that retail trade has an index of 75.9, while professional services is 114.7. If you work in retail and earn $80,000 (index 73.8), you are slightly below the industry average. A salary sacrifice car might be less common in lower-paid industries because the tax benefit is smaller.

State differences and the index

Your gross salary also determines where you sit on the state index. For example, the states page shows that Western Australia has an index of 106.9 (annualised $115,825), while Tasmania is 88.6 ($96,008). If you earn $100,000 gross, your index is 92.3 nationally, but in WA that is below the state average, while in TAS it is above. This context can help you negotiate or decide whether a salary sacrifice arrangement is worth it given local living costs.

Tax considerations

Salary sacrifice reduces your taxable income, so the tax you pay depends on your marginal rate. For the 2026–27 income year, 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%. If your gross salary puts you in the 30% bracket, every dollar sacrificed saves you 30 cents in tax plus 2 cents Medicare. If you are in the 37% bracket, the saving is larger.

However, salary sacrifice for an electric car may also involve fringe benefits tax (FBT). The Australian government has provided an FBT exemption for eligible electric cars from 2022, but the rules are specific. You should check with your employer or a tax professional. The index does not capture these nuances, but it gives you a clear picture of your gross position.

How the index works in practice

To calculate your personal index, divide your annual gross ordinary-time earnings by $108,352 and multiply by 100. For example, $120,000 ÷ $108,352 × 100 = 110.8. You can then compare this to the national line, state averages, or industry averages. The how the index works page explains the calculation in more detail.

Remember that the index is a benchmark, not a quote for a specific job or award classification. Modern awards may set higher minimum rates than the national minimum wage. The national minimum wage from 1 July 2026 is $26.44 per hour, or $1,004.90 per week, which gives an index of 48.2. If you are on an award, your actual pay may be higher, and your index will reflect that.

Final thoughts

Salary sacrifice for an electric car can be a smart way to reduce tax, but it does not change your gross salary index. The index remains a reliable way to see where your earning power stands. When evaluating a salary sacrifice offer, always start with the gross figure and the index. Then factor in the net benefit of the car, your tax bracket, and any FBT implications. For more on related topics, visit the topics page.

If you are unsure about your exact index or how salary sacrifice affects your pay, consult your employer or a qualified advisor. The index is a guide, not a personal financial recommendation.