Can I salary sacrifice? How it affects your minimum wage in Australia

Can I salary sacrifice? Understanding how it interacts with minimum wage

If you are wondering "can I salary sacrifice?", the short answer is yes – but with important limits. Salary sacrifice is an arrangement where you agree to forgo part of your salary in exchange for benefits such as a car, laptop, or additional superannuation contributions. However, it cannot reduce your pay below the legal minimum wage. This guide explains how salary sacrifice works alongside Australia's pay floors, so you can check whether your arrangement is lawful.

What is salary sacrifice?

Salary sacrifice (also called salary packaging) is a voluntary agreement between you and your employer. You give up some of your pre-tax salary, and your employer provides a benefit of equal value. The benefit is usually subject to fringe benefits tax (FBT), but some items like superannuation above the compulsory guarantee are exempt. The Australian Taxation Office sets the rules for what can be sacrificed and how FBT applies.

Importantly, salary sacrifice does not change your minimum wage entitlement. Your employer must still pay you at least the minimum wage in cash (or its equivalent) before any sacrifice. The Fair Work Ombudsman states that salary sacrifice cannot result in you receiving less than the minimum pay rates under your award, agreement, or the National Minimum Wage.

How salary sacrifice affects your minimum wage entitlement

From 1 July 2026, the National Minimum Wage is $26.44 per hour or $1,004.90 per week for adult award-free employees (). If you are covered by a modern award, the minimum award wage increased by 4.75% from the same date, but the lowest ongoing classification cannot fall below the national minimum ().

If you salary sacrifice, your employer must still pay you at least that amount in cash or as a combination of cash and benefits that you can freely access. For example, if your award rate is $30 per hour, you cannot sacrifice so much that your cash pay drops below $30 per hour. The sacrificed amount is on top of the minimum, not instead of it.

Note that not every worker receives $26.44 per hour. Junior employees (under 21), apprentices, trainees, and those on introductory award rates may be paid less. For award-free juniors, the rates range from $9.73 per hour (under 16) to $25.84 per hour (age 20). Salary sacrifice for these workers must still respect their applicable minimum.

Award and agreement rates vs salary sacrifice

Most Australian employees are covered by a modern award or enterprise agreement. These documents set minimum pay rates that are often higher than the National Minimum Wage. The Fair Work Commission sets the national minimum wage, but the Fair Work Ombudsman explains and enforces it. If your award says you must be paid $28 per hour, you cannot salary sacrifice below that rate.

To check which minimum applies to you, use the Which minimum wage applies guide or the Rate tables on this site. If you are covered by an enterprise agreement, check the agreement for the base rate. Salary sacrifice is a separate matter – it does not override your award or agreement.

Superannuation and salary sacrifice

Superannuation guarantee contributions are paid on top of your ordinary time earnings. From 1 July 2026, the rate is 12%, and employers must pay super on the same day as wages. If you salary sacrifice part of your salary into super, that amount is generally included in your ordinary time earnings, so your employer must still pay the 12% on it. However, salary sacrifice into super does not reduce the minimum cash wage you must receive. The Australian Taxation Office provides guidance on how salary sacrifice interacts with super caps.

Practical check: comparing your rate to the floor

To see if your salary sacrifice arrangement is lawful, compare your hourly or weekly cash pay (before sacrifice) to the applicable minimum. The chart above shows the average full-time adult ordinary-time earnings of $2,083.70 per week (ABS May 2026) – well above the minimum. But if your pay is close to the minimum, sacrificing too much could break the law.

If you are award-free and adult, your cash pay must be at least $26.44 per hour. If you are on an award, use the Guides to find your classification rate. Remember that salary sacrifice reduces your taxable income, which may affect your take-home pay and eligibility for some government benefits, but it does not change your minimum wage obligation.

The bottom line

Yes, you can salary sacrifice, but it cannot reduce your pay below the legal floor. Always check your award or agreement first. If you are unsure, consult the Fair Work Ombudsman or the Australian Taxation Office. This site provides orientation only – it is not a pay determination or tax advice.