Salary sacrifice electric car: how it affects your minimum wage and take-home pay

Salary sacrifice electric car and the national minimum wage

Salary sacrificing an electric car can reduce your taxable income, but it also affects your take-home pay and interactions with Australia's minimum wage system. This guide explains how the legal pay floor applies, what salary sacrifice means for your weekly packet, and how the FBT exemption for eligible electric cars works.

The legal minimum wage floor

All employees in Australia are entitled to a minimum wage. For most, this is set by a modern award or enterprise agreement. If you are not covered by an award or agreement, the national minimum wage applies. From 1 July 2026, the national minimum wage is $26.44 per hour or $1,004.90 per week for a full-time adult employee. Casual employees receive a loading of 25%, giving a minimum of $33.05 per hour. These rates are before tax and before any salary sacrifice arrangement. Fair Work Ombudsman explains that the minimum wage is the gross amount before deductions.

However, not every worker must receive $26.44 per hour. Juniors, apprentices, trainees, and employees on introductory award rates may be paid less. For example, award-free juniors under 16 receive $9.73 per hour (36.8% of the adult rate). Award rates can also include introductory rates for new employees, limited to the first six months, which cannot fall below $25.74 per hour or $978.10 per week from 1 July 2026. Always check your award or agreement for the correct rate. Use our Which minimum wage applies guide to find your pay floor.

Salary sacrifice basics

Salary sacrifice (also called salary packaging) is an arrangement where you agree to receive less pre-tax salary in exchange for your employer providing a benefit of similar value. The Australian Taxation Office ATO states that there is no restriction on the types of benefits, but most are fringe benefits subject to FBT. Your employer pays FBT on the taxable value of the benefit, which can reduce the tax-effectiveness of the arrangement. However, from 1 July 2022, eligible electric cars and associated expenses (such as charging, registration, and insurance) are exempt from FBT, provided certain conditions are met. notes that this exemption makes salary packaging an electric car more attractive for employees.

How salary sacrifice for an electric car affects your pay

When you salary sacrifice an electric car, you forgo a portion of your pre-tax salary. Your employer uses that amount to pay for the car and its running costs. Because the benefit is FBT-exempt (for eligible cars), your employer does not need to pay FBT, and you do not need to make an employee contribution to reduce FBT. This can increase your net disposable income compared to a non-exempt car.

Consider an example based on the ATO's illustration (using a non-electric car). An employee earning $65,000 per year who salary sacrifices a car worth $35,000 with $11,500 running expenses sees their taxable income drop to $47,647 if no employee contribution is made. After tax and Medicare, net disposable income is $41,611.96, compared to $41,912.00 without salary sacrifice. However, with an employee contribution of $7,000, net disposable income rises to $43,593.40. For an electric car, the FBT exemption means no employee contribution is typically required, so the net disposable income could be higher. But the exact outcome depends on your salary, the car's cost, and your employer's policies.

It is important to note that salary sacrifice does not change your minimum wage entitlement. Your employer must still pay you at least the minimum wage for the hours you work, before the sacrifice. The sacrificed amount is a deduction from your gross pay, not a reduction in the hourly rate. If your post-sacrifice pay falls below the minimum wage, the arrangement is not valid.

Super guarantee on top

Your employer must pay the super guarantee (12% from 1 July 2026) on your ordinary time earnings, calculated as if no salary sacrifice existed. Salary sacrificed super contributions are additional and count towards your concessional contributions cap ($32,500 for 2026-27). The ATO clarifies that salary sacrificed super is not a fringe benefit if paid to a complying fund. So your super balance benefits from both the mandatory employer contribution and any voluntary sacrifice.

Award and agreement rates

If you are covered by a modern award or enterprise agreement, your minimum pay rate may be higher than the national minimum wage. Awards often include penalty rates, allowances, and classification-based pay. Salary sacrifice does not override these entitlements. Your employer must still pay at least the award rate before any sacrifice. Check our Rate tables for current award minimums.

Considerations

Salary sacrifice can affect your eligibility for government benefits, child support, and the Medicare levy surcharge. It also reduces your taxable income, which may lower your compulsory HELP repayment. From 1 April 2027, work-related items provided through salary sacrifice will no longer be exempt from FBT, as per the ATO. Always seek professional advice before entering an arrangement.

This guide is for orientation only and is not a pay determination or tax advice. For specific situations, consult the Fair Work Ombudsman or a qualified accountant. See our How the figures work page for more details on our calculations.