Can you salary sacrifice a car? How it interacts with the minimum wage

Can you salary sacrifice a car? Understanding the pay floor

Yes, you can salary sacrifice a car in Australia, but this arrangement does not change the minimum wage you must be paid. Salary packaging allows you to pay for a vehicle (or its lease) from your pre-tax salary, reducing your taxable income. However, the legal pay floor—set by the Fair Work Commission—still applies to the cash component of your wages. This guide explains how salary sacrifice interacts with the national minimum wage, award rates, and other pay standards.

The legal minimum wage and salary sacrifice

The national minimum wage from 1 July 2026 is $26.44 per hour, or $1,004.90 per week for a full-time adult employee (38 ordinary hours). Casual employees receive a 25% loading, making the casual rate $33.05 per hour. These rates are the absolute floor for award-free and agreement-free national-system employees. If you salary sacrifice a car, your employer must still pay you at least this amount in cash after the sacrifice is deducted. The sacrificed portion cannot bring your cash pay below the minimum.

For employees covered by a modern award, the award rate is the minimum. The lowest ongoing award classification cannot fall below the national minimum, but many awards have higher rates. Introductory rates (first six months) are $25.74 per hour or $978.10 per week. Salary sacrifice does not override these award minima.

How salary sacrifice relates to casual loading and junior rates

Casual loading (25% for award-free employees) is calculated on the base hourly rate before any salary sacrifice. For example, if you are a casual adult earning the minimum, your base is $26.44, and the loading adds $6.61, giving $33.05. Salary sacrifice reduces your taxable income but does not change the base rate used to calculate loading. Similarly, junior rates (for award-free employees under 21) are percentages of the adult minimum. A 17-year-old, for instance, gets 57.8% of $26.44, or $15.29 per hour (casual $19.11). Salary sacrifice cannot reduce these percentages.

Award rates, enterprise agreements, and negotiated salaries

If you are covered by a modern award or enterprise agreement, the minimum rate is set by that instrument. Salary sacrifice must not cause your cash pay to fall below the award or agreement rate. Negotiated salaries above the minimum are common, and salary sacrifice can be part of a total remuneration package. However, the Fair Work Ombudsman explains that salary sacrifice does not allow an employer to pay less than the legal minimum in cash.

Super guarantee on sacrificed amounts

Employers must pay super guarantee of 12% on ordinary time earnings, which generally includes salary sacrifice amounts. So if you sacrifice part of your salary for a car, your employer still calculates super on that sacrificed amount. This is an additional cost for the employer, paid on top of your cash wage.

What if your employer is in the state system?

Most private-sector employees are in the national system, but some state public sector and local government employees, and some Western Australian sole traders and partnerships, are covered by state awards. Those awards may have different minimum rates, but the same principle applies: salary sacrifice cannot reduce cash pay below the state minimum.

For more details on which minimum wage applies to you, see Which minimum wage applies. For a full breakdown of current rates, visit Rate tables.

Summary

Salary sacrificing a car is a tax-effective way to pay for a vehicle, but it does not change your entitlement to the minimum wage. Your cash pay must always meet the legal floor, award rate, or agreement rate. If you are unsure about your specific situation, consult your employer or a qualified adviser. This site provides orientation only—not legal or tax advice.

FAQs

(FAQs are listed separately above.)

For the published floors, see the rate tables and how the figures work.