Salary Packaging Australia: How It Interacts with Minimum Wage and Award Rates

What Is Salary Packaging?

Salary packaging (also called salary sacrifice) is an arrangement where an employee agrees to forgo part of their pre-tax salary in exchange for benefits such as a car, superannuation contributions, or electronic devices. It is a common way to reduce taxable income, especially in the not-for-profit and public sectors. However, salary packaging does not change the legal minimum wage that applies to your employment.

The Legal Minimum Wage and Salary Packaging

From 1 July 2026, the adult national minimum wage is $26.44 per hour, $1,004.90 per week for a 38‑hour week, and $33.05 per hour for casuals (including the 25% casual loading). These rates are set by the Fair Work Commission and enforced by the Fair Work Ombudsman. The Fair Work Ombudsman explains that salary sacrifice cannot reduce your base rate of pay below the applicable minimum. This means your cash wage (after any salary sacrifice deductions) must still equal or exceed the minimum hourly rate.

For award‑free employees, the national minimum wage is the floor. For employees covered by a modern award, the award rate for your classification is the minimum. Salary packaging is a separate arrangement; it does not replace or lower the award rate. Your employer must pay you at least the award rate in cash before any salary sacrifice is applied.

Salary Packaging and Award Rates

Modern awards set minimum wages for each classification. For example, the lowest ongoing classification under most awards cannot be less than $26.44 per hour from 1 July 2026. Some awards have introductory rates (up to $25.74 per hour for the first six months) and junior rates (as low as $9.73 per hour for award‑free juniors under 16). Salary packaging does not change these minimums. If you salary sacrifice, your employer must still ensure your cash wage meets the award rate. Some awards contain specific clauses about salary sacrifice, so it is important to check your award or enterprise agreement.

Salary Packaging and Enterprise Agreements

Enterprise agreements can set higher rates than the award or national minimum. They may also include provisions about salary packaging. If you are covered by an enterprise agreement, the agreement’s terms apply, but the base rate of pay must still be at least the relevant minimum. Salary packaging cannot be used to reduce the base rate below that minimum.

How Salary Packaging Compares with Survey Averages

The Australian Bureau of Statistics (ABS) reports 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. These are survey averages, not legal minimums. Salary packaging can affect your taxable income but does not directly change these averages. Your actual take‑home pay after salary sacrifice may be lower than the average, but your employer must still pay you at least the minimum wage or award rate.

Superannuation and Salary Packaging

Employers must pay superannuation guarantee contributions of 12% on top of ordinary time earnings from 1 July 2026. If you salary sacrifice part of your salary into super, your ordinary time earnings may be reduced, which could lower the super guarantee amount your employer must pay. However, some awards or agreements require super to be calculated on the pre‑sacrifice salary. Always check your award or agreement. The super guarantee is an employer payment on top of your wage, not deducted from it.

Key Points to Remember

• The national minimum wage is $26.44 per hour (adult) from 1 July 2026. Casual employees receive $33.05 per hour including loading.
• Salary packaging does not reduce the legal minimum cash wage you must receive.
• Modern awards and enterprise agreements can set higher rates than the national minimum.
• Junior, apprentice, trainee, and supported wage rates may be lower than the adult minimum.
• Superannuation guarantee is 12% on ordinary time earnings, paid by the employer on top of your wage.
• For more details on which minimum wage applies to you, see Which minimum wage applies and Rate tables.

Common Questions About Salary Packaging and Minimum Wages

While the three FAQs above cover the main points, here are additional considerations:

• If you are award‑free and under 21, the junior percentage rates apply. Salary packaging does not change those percentages.
• If you are a casual, the casual loading is already included in the hourly rate (e.g., $33.05 for casual adult). Salary packaging is separate.
• Salary packaging is not a pay determination, tax advice, or legal advice. It is an arrangement between you and your employer. Always seek independent advice from a qualified professional.

For a full list of rates and historical minimum wages, see the reference table on this site. The Fair Work Commission sets the national minimum, not the Fair Work Ombudsman enforces.

This guide is for orientation only. It is not a substitute for legal advice.

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