Comparing job offers: how salary packaging car options change your take-home pay
Your take-home pay depends on your salary, tax bracket, and any salary packaging arrangement; the ATO example shows a $65,000 salary with a car package can yield net disposable income of $43,593 with employee contributions.
How to compare job offers using take-home pay
When you receive a job offer, the headline salary is only part of the picture. What matters most is the amount that reaches your bank account after tax, the Medicare levy, and any salary sacrifice arrangements. One common benefit that can shift your take-home pay significantly is salary packaging car – an option that lets you use pre-tax income to pay for a vehicle and its running costs.
Understanding your taxable income
Your taxable income is your gross salary minus any salary sacrifice amounts. The Australian Taxation Office explains that a salary sacrifice arrangement reduces your taxable income, meaning you may pay less tax. For the 2026–27 tax year, the resident tax rates are:
- Up to $18,200: nil
- $18,201 to $45,000: 15 cents per $1 over $18,200
- $45,001 to $135,000: $4,020 plus 30 cents per $1 over $45,000
- $135,001 to $190,000: $31,020 plus 37 cents per $1 over $135,000
- Over $190,000: $51,370 plus 45 cents per $1 over $190,000
You also pay the Medicare levy at 2% of your taxable income, unless your income is below the single thresholds of $28,011 or $35,013 (where a shading rate applies). Full-time salaries typically pay the full 2%.
The role of salary packaging car
Salary packaging a car means you agree to receive less salary before tax, and your employer provides a car and pays for expenses like registration, insurance, and fuel. The ATO gives a detailed example: Sam earns $65,000 a year and packages a $35,000 car with $11,500 running costs. Without any employee contributions, Sam’s taxable income drops to $47,647, and net disposable income is $41,611.96. But if Sam makes an employee contribution of $7,000 (to reduce the FBT the employer pays), the taxable income becomes $60,855, and net disposable income rises to $43,593.40.
This shows that salary packaging car can increase your take-home pay, but only if structured correctly. The key is to compare the net disposable income – what you have left after tax, the sacrifice amount, and any employee contributions – against the scenario without packaging.
How to compare job offers
When evaluating two job offers, follow these steps:
- Calculate your base take-home pay using the tax rates and Medicare levy. For a salary of $65,000, the tax is $10,288 plus Medicare $1,300, leaving $53,412 before any deductions.
- Factor in salary packaging if offered. Use the ATO’s method to estimate your new taxable income and net disposable income. Remember that your employer must still pay the super guarantee (12% from 1 July 2026) on your original salary, not the sacrificed amount.
- Consider the impact on benefits. Salary packaging can affect the Medicare levy surcharge, study loan repayments, and some government benefits. Check the Tax and Medicare guide for details.
- Look at the total package, not just salary. A lower headline salary with a car benefit might leave you better off after tax.
Minimum wage benchmark
Fair Work sets the National Minimum Wage at $26.44 per hour or $1,004.90 per week (from 1 July 2026). If your job offer is near this level, salary packaging may not be as beneficial because your tax rate is low. But for higher incomes, the savings can be substantial.
Super and salary packaging
Salary sacrificed super contributions are treated as employer contributions and are not subject to FBT. They count towards the concessional contribution cap of $32,500 per year. Your employer must still pay the super guarantee on your original salary. For more, see the Super page.
Final tips
- Always arrange salary packaging before you earn the income – you cannot sacrifice after the fact.
- Ask your employer if they offer salary packaging and what benefits are available. Not all employers provide car packaging.
- Use the Take-home pay calculator to estimate your net income with and without packaging.
- Remember that the ATO example is for illustration; your actual results depend on your specific salary, car value, and FBT calculations.
By focusing on the amount that reaches your bank account, you can make a smarter decision between job offers. Salary packaging car is just one tool – but used wisely, it can boost your disposable income.
Questions
What is salary packaging a car?
Salary packaging a car is an arrangement where you and your employer agree to reduce your pre-tax salary in exchange for your employer providing a car and covering its running costs. This lowers your taxable income, meaning you pay less income tax and Medicare levy. However, your employer may need to pay fringe benefits tax (FBT) on the car benefit, which can affect the overall value.
How does salary packaging a car affect my Medicare levy?
Because salary packaging reduces your taxable income, it can lower your Medicare levy if your income falls near the single-person thresholds of $28,011 and $35,013. The levy is 2% of your taxable income, so a lower taxable income means a lower levy. But if your income is above the upper threshold, you pay the full 2% regardless.
Is salary packaging a car worth it?
It depends on your income, the FBT implications, and whether you make employee contributions. The Australian Taxation Office provides an example where a $65,000 salary with a car package and employee contributions of $7,000 results in a net disposable income of $43,593, compared to $41,912 without packaging. You should also consider how it affects super, government benefits, and any surcharges.