Novated Lease Smart Salary and the National Minimum Wage: What You Need to Know

Novated Lease Smart Salary and the Australian Minimum Wage

If you are considering a novated lease smart salary arrangement, it is important to understand how the Australian minimum wage system works. A novated lease is a type of salary packaging where your employer deducts lease payments from your pre‑tax salary. While this can reduce your taxable income, it does not change the minimum pay your employer is legally required to give you. This guide explains the pay floors that apply and how they interact with salary‑sacrifice arrangements.

Which pay floor applies to you?

Most employees in Australia are covered by a modern award or an enterprise agreement. The award or agreement sets the minimum hourly rate, allowances, and penalty rates for your classification. If you are not covered by any award or agreement, the national minimum wage applies. 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 working 38 ordinary hours, according to the Fair Work Commission.

Your employer must pay at least this amount before any salary‑sacrifice deductions. A novated lease is a post‑tax or pre‑tax arrangement that affects your take‑home pay, but it does not reduce the gross wage your employer must pay. The Fair Work Ombudsman explains that the minimum wage is the amount before tax is taken out.

Award rates and the national minimum

If you are covered by a modern award, your minimum rate may be higher than the national minimum. For example, many awards have introductory rates for new employees that are lower than the ongoing classification rate. From 1 July 2026, the lowest ongoing award classification cannot fall below the national minimum of $26.44 per hour. Introductory rates (limited to the first six months) cannot be less than $25.74 per hour or $978.10 per week. Always check your award using the Rate tables on this site or the Fair Work Ombudsman’s Pay Calculator.

Casual loading and age percentages

Casual employees who are award‑free are entitled to a 25% loading on top of the national minimum wage, making the casual rate $33.05 per hour. This loading is calculated on the base rate before any salary packaging. Similarly, junior employees (under 21) who are award‑free receive a percentage of the adult rate. For example, a 17‑year‑old award‑free junior is entitled to 57.8% of $26.44, which is $15.29 per hour (casual $19.11). These percentages are set by the National Minimum Wage Order and are not affected by a novated lease.

Superannuation is on top

Employers must pay superannuation guarantee contributions of 12% on your ordinary time earnings. This is calculated on your gross wage before any salary‑sacrifice deductions, including a novated lease. So even if you reduce your taxable income through salary packaging, your super contributions are based on the full ordinary time earnings. The minimum wage figures quoted here are before super; the employer pays super in addition.

How a novated lease fits in

A novated lease smart salary arrangement is a common way to finance a car through pre‑tax salary. It can lower your taxable income, but it does not change your minimum wage entitlement. Your employer must still pay you at least the applicable minimum rate. If your salary after packaging falls below the minimum wage, that would be unlawful. Always ensure that your base salary (before packaging) meets the legal minimum.

Comparing the minimum to average earnings

The national minimum wage is a floor. According to the Australian Bureau of Statistics (May 2026), full‑time adult ordinary‑time earnings averaged $2,083.70 per week. Many employees earn well above the minimum, especially in skilled roles. A novated lease is more common for those with higher incomes, but it can still be used by anyone earning above the minimum. However, if your gross salary is close to the minimum, salary packaging may reduce your take‑home pay below a viable level.

What about enterprise agreements?

If your workplace has an enterprise agreement, that agreement sets the minimum pay rates. It must pass the better‑off‑overall test compared to the relevant award. An enterprise agreement can include salary‑sacrifice provisions, but the base rate must still meet the award or national minimum. Check your agreement or ask your employer.

Need more help?

Use our Which minimum wage applies guide to find the right pay floor for your situation. For detailed rates, see our Rate tables. Remember, this information is for orientation only and is not legal or tax advice. For specific questions about your novated lease, consult your employer or a qualified tax professional.

Key takeaways

• The national minimum wage is $26.44/h or $1,004.90/wk from 1 July 2026.
• Award or agreement rates may be higher.
• A novated lease does not reduce your minimum wage obligation.
• Super is paid on your ordinary time earnings before salary sacrifice.
• Casual loading and junior percentages apply on top of the base rate.