Salary sacrifice is one of those terms that gets mentioned a lot, especially when cars are involved, but rarely explained clearly.
So let’s strip it back and explain what it actually is, who it suits, and why it doesn’t need to be complicated.
What is salary sacrifice?
In simple terms, salary sacrifice means using part of your pre-tax salary to pay for certain expenses, like a car.
Instead of paying for those costs from your take-home pay, they’re deducted before tax. This can reduce your taxable income and make your money go further.
When it comes to cars, this is commonly done through a novated lease.
How does salary sacrifice work with a car?
Rather than paying for a car and its running costs separately, salary sacrifice bundles things together into a regular payment taken from your salary before tax.
This typically covers:
- The vehicle
- Running costs (like fuel, servicing and insurance)
- Ongoing administration
Once it’s set up, it runs quietly in the background — without you needing to manage multiple bills or providers.
Who does salary sacrifice suit?
Salary sacrifice can be a good option if you:
- Are employed and paid a regular salary
- Want simpler budgeting for your car expenses
- Prefer predictability over variable costs
It’s not about changing how much you earn – it’s about structuring what you already earn more efficiently.
Why it doesn’t need to be complicated
One of the biggest misconceptions is that salary packaging involves a lot of paperwork or ongoing admin.
In reality, once everything is set up:
- The process is largely managed for you
- Payments are automatic
- You have a single point of contact if you need help
The key is having the right guidance upfront so you understand how it works before committing.
The easiest place to start
If you’re curious but not ready to speak to someone yet, the simplest next step is to look at the numbers.
A savings calculator can give you a quick indication of:
- Whether salary sacrifice could suit you
- How it compares to paying for a car after tax
Try the savings calculator
No jargon. No pressure. Just a clearer picture.
