Does salary packaging a car affect my minimum wage entitlement?

No. Salary packaging is a pre‑tax arrangement that reduces your taxable income, but your gross wage (before salary sacrifice deductions) must still meet the minimum wage under the relevant award or the National Minimum Wage. The Fair Work Ombudsman enforces this requirement, and the Fair Work Commission sets the national minimum wage each year.

Can I salary package a car if I am paid the national minimum wage?

Technically yes, but in practice it is rare. Salary packaging typically works best when your gross wage is high enough to benefit from the tax savings. On the national minimum wage of $1,004.90 per week, salary sacrificing a car may leave you with very little take‑home pay to cover living expenses. You should check with your employer and a tax professional before entering into a salary sacrifice arrangement.

How does salary packaging interact with award rates?

A modern award or enterprise agreement sets the minimum pay rate for your classification. Salary packaging cannot reduce that gross rate. The Australian Taxation Office (ATO) sets rules for how salary sacrifice is treated for tax purposes, but the underlying wage must still comply with the award. If you are covered by an award, your base rate of pay (before any sacrifice) must be at least the award rate, including any applicable penalty rates or loadings.

How to Salary Package a Car: Understanding Your Pay Floor and Minimum Wage Rates

As of 1 July 2026, the national minimum wage for award‑free adult employees is $26.44 per hour or $1,004.90 per week, with a 25% casual loading bringing the casual rate to $33.05 per hour.

How to Salary Package a Car: Know Your Minimum Wage Floor

Salary packaging a car is a common way to reduce your taxable income by using pre‑tax salary to cover car lease payments. But before you sign up, it is essential to understand the legal pay floor that applies to you. This guide explains how the national minimum wage, modern award rates, and enterprise agreements set the minimum you must be paid, and how salary packaging fits into that picture.

The Legal Minimum Wage

The Fair Work Commission reviews the national minimum wage each year. From 1 July 2026, the national minimum wage for adult employees not covered by an award or registered agreement is:

$26.44 per hour
$1,004.90 per week (based on 38 ordinary hours)
$33.05 per hour for casual employees (including the 25% casual loading)

These rates apply from the first full pay period on or after 1 July 2026. The Fair Work Ombudsman provides tools to check your correct pay, including the Pay and Conditions Tool.

Important: The national minimum wage is not a universal rate. Juniors, apprentices, trainees, and employees with a disability may be paid less. Award‑free junior rates range from 36.8% of the adult rate for under‑16s to 97.7% for 20‑year‑olds. Apprentice and trainee rates for award‑free employees follow the Miscellaneous Award, not the junior percentages.

Award and Agreement Rates

Most Australian employees are covered by a modern award or an enterprise agreement. These documents set minimum pay rates that are often higher than the national minimum wage. From 1 July 2026, modern award minimum wages increased by 4.75%, but the lowest ongoing classification in any award cannot fall below $26.44 per hour or $1,004.90 per week. Introductory rates limited to the first six months cannot fall below $25.74 per hour or $978.10 per week.

If you are covered by an award, your employer must pay you at least the award rate for your classification. If you are covered by an enterprise agreement, the base rate in the agreement cannot be less than the base rate in the relevant award. Always check your award or agreement before assuming the national minimum wage applies.

How Salary Packaging Affects Your Pay

Salary packaging a car involves your employer reducing your gross salary by the amount of the car lease payments and related costs, and paying those costs on your behalf. The amount sacrificed is not subject to income tax, which can lower your tax bill. However, salary packaging does not change your gross wage for the purpose of minimum wage compliance. Your employer must still pay you at least the minimum wage or award rate before any salary sacrifice deduction.

For example, if your award rate is $30.00 per hour and you salary package $200 per week, your gross wage must still be at least $30.00 per hour. The $200 is deducted from your gross pay, but the gross figure itself must meet the legal minimum.

Superannuation Guarantee

Employers must pay superannuation guarantee contributions on top of your ordinary time earnings. From 1 July 2026, the super guarantee rate is 12%. This is calculated on your gross wage before salary sacrifice (unless your employer uses a salary sacrifice arrangement that reduces your ordinary time earnings for super purposes – check your employment contract). The super guarantee is an additional cost to your employer, not a deduction from your pay.

Average Earnings vs. Minimum Wage

The Australian Bureau of Statistics (ABS) reports that in May 2026, full‑time adult ordinary‑time earnings averaged $2,083.70 per week, while all employees averaged $1,579.20 per week. These figures are much higher than the national minimum wage, reflecting that most workers earn above the legal floor. Salary packaging a car is more common among employees earning above the minimum, because the tax savings are more meaningful when your income is higher.

Key Points to Remember

The national minimum wage is the legal floor for award‑free employees. Most workers are covered by an award or agreement that sets a higher rate.
Salary packaging a car does not reduce your gross wage below the minimum. Your employer must still pay you at least the applicable minimum rate.
Superannuation is paid on top of your ordinary time earnings at 12%.
Junior, apprentice, and trainee rates are lower than the adult rate. Check your specific situation using the Rate tables or Guides on this site.
If you are unsure which pay floor applies, use the Fair Work Ombudsman’s Pay and Conditions Tool or consult your award.

Final Note

This guide provides general information only. It is not tax advice or a pay determination. Salary packaging rules are set by the Australian Taxation Office, and your specific circumstances may vary. Always seek professional advice before entering a salary sacrifice arrangement.

For more detail on how minimum wages are calculated, see How the figures work. To find out which minimum wage applies to you, visit Which minimum wage applies.