Car allowance salary package: award coverage versus award-free rates

Car allowance salary package and the minimum wage

A car allowance salary package is a common arrangement where an employee receives a fixed amount to cover the costs of using their own vehicle for work, often bundled with their base salary. Understanding how this fits with Australia’s minimum wage system is essential for both employers and employees.

What is a car allowance salary package?

A car allowance is a regular payment made to an employee to compensate for using their personal vehicle for work-related travel. It is typically paid per fortnight or per month and may be part of a broader salary package that includes base salary, superannuation, and other benefits. Unlike a fully maintained company car, a car allowance leaves the employee responsible for running costs such as fuel, insurance, and maintenance.

Legal minimum wage and award coverage

The legal minimum wage in Australia is set by the Fair Work Commission. As of 1 July 2026, the National Minimum Wage is $26.44 per hour or $1,004.90 per week for a full-time adult employee not covered by an award or registered agreement . This is the floor: no employee can be paid less, regardless of how their salary is packaged.

However, most employees are covered by a modern award or enterprise agreement that sets higher minimum rates. Awards also specify allowances, including vehicle allowances, which must be paid in addition to the base hourly rate. The Fair Work Commission’s Modern Awards Pay Database contains the current minimum rates for these allowances .

Award rates for car allowances

Vehicle allowances vary significantly between awards. For example, the Aged Care Award and the Social, Community, Home Care and Disability Services Industry Award (SCHADS) recently had a temporary increase to their vehicle allowance from 1 September 2026 . Other awards, such as the Clerks Award or the Manufacturing Award, have their own prescribed rates. To find the correct allowance, you must identify your award and classification, then check the wage-related allowances spreadsheet in the Modern Awards Pay Database.

If your award includes a car allowance, that amount is part of your minimum entitlement. Your total pay (base rate plus allowance) must meet or exceed the award minimum. If the allowance is not paid, your employer may be underpaying you.

Award-free employees and car allowances

Employees not covered by any award or registered agreement are only entitled to the National Minimum Wage. There is no mandated car allowance for award-free employees. However, if you negotiate a car allowance salary package, the total hourly rate (including the allowance) must still be at least $26.44 per hour (or the applicable junior, apprentice, or supported wage rate). The allowance can be counted toward that minimum, but it cannot be used to reduce the base rate below the legal floor.

For award-free employees, a car allowance salary package is a matter of negotiation. The Fair Work Ombudsman advises that employers cannot force employees to buy work-related items if it is unreasonable, but a voluntary agreement to include a car allowance is acceptable.

Comparing with average earnings

To put these figures in perspective, the Australian Bureau of Statistics reported that in May 2026, full-time adult ordinary-time earnings averaged $2,083.70 per week, and all employees averaged $1,579.20 per week. A car allowance salary package that falls well below these averages may still be legal if it meets the minimum wage, but it may not be competitive. The National Minimum Wage of $1,004.90 per week is roughly half the full-time average, highlighting the gap between the legal floor and typical market rates.

Superannuation on car allowance salary packages

Superannuation guarantee contributions (12% from 1 July 2026) are payable on ordinary time earnings. The Australian Taxation Office defines ordinary time earnings as the amount an employee earns for their ordinary hours of work, including commissions, allowances, and bonuses that are ordinary time earnings. Most car allowances are considered ordinary time earnings, so your employer must pay super on the allowance amount. However, reimbursements for actual expenses (e.g., fuel receipts) may not attract super. Check your award or agreement to be sure.

Key considerations

• Award coverage: Always check your award first. It sets the minimum base rate and any vehicle allowance.
• Agreements: Enterprise agreements can vary award terms but must pass the Better Off Overall Test.
• Salary packaging: A car allowance salary package can be structured as a salary sacrifice arrangement, which may affect your taxable income and super contributions. Seek professional advice.
• Record keeping: Employers must keep accurate records of all allowances paid.

For more guidance, see Which minimum wage applies and Rate tables on this site.

Frequently Asked Questions

(FAQs are provided in the structured data above.)

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