Can salary packaging for living expenses reduce my pay below the minimum wage?

No. Under the Fair Work Act, wages must be paid in money (cash). Salary packaging (salary sacrifice) can reduce your taxable income, but the cash component of your pay must still equal or exceed the applicable minimum wage. For example, if you earn $26.44 per hour, your employer must pay at least that amount in cash; any packaged benefits are on top.

Does salary packaging affect my super guarantee contributions?

Yes. The super guarantee is calculated on your ordinary time earnings (OTE), which is generally your gross salary before salary sacrifice. However, salary sacrifice amounts that are sacrificed into super are still counted as OTE for super guarantee purposes. For other living expenses packaging (e.g., rent, mortgage), the sacrificed amount reduces your cash salary but not your OTE for super, so your employer must still pay 12% super on the full OTE amount.

If I'm covered by an award, can salary packaging change my minimum award rate?

No. Modern awards set minimum rates that must be paid in cash. Salary packaging cannot reduce the cash component below the award rate. Some awards have specific clauses about salary sacrifice, but generally the award minimum must be met in cash. Always check your award or enterprise agreement, as some may allow packaging above the minimum but never below.

Salary Packaging Living Expenses and the Minimum Wage: What You Need to Know

From 1 July 2026, the national minimum wage is $26.44 per hour or $1,004.90 per week, but salary packaging cannot reduce your cash pay below this floor.

Salary Packaging Living Expenses and the Minimum Wage

Salary packaging (also called salary sacrifice) allows you to pay for certain living expenses—such as rent, mortgage, car payments, or school fees—with pre-tax dollars. This can reduce your taxable income and increase your take-home pay for other purposes. However, it is crucial to understand how salary packaging interacts with Australia's minimum wage laws. The legal floor is set by the Fair Work Commission, and no arrangement can leave you with less cash than the minimum wage.

The Legal Minimum Wage

From 1 July 2026, the adult national minimum wage is $26.44 per hour or $1,004.90 per week for a 38-hour week. Casual employees receive a loading of 25%, making the casual rate $33.05 per hour. These rates apply to award-free and agreement-free national-system employees. If you are covered by a modern award, the award rate may be higher, and that higher rate becomes your minimum. The Fair Work Ombudsman explains and enforces these rules.

Salary packaging for living expenses cannot reduce your cash wage below these figures. For example, if your base salary is $50,000 per year and you salary package $10,000 for rent, your cash salary becomes $40,000. That $40,000 must still be at least $26.44 per hour (or the applicable award rate) when divided by your ordinary hours. If it falls below, the arrangement is unlawful.

Separating the Legal Minimum from Other Figures

It is important to distinguish between the legal minimum, survey averages, award rates, and negotiated salaries.

Legal minimum: The national minimum wage or the relevant award rate. This is the absolute floor.
Survey average: According to the ABS May 2026, full-time adult ordinary-time earnings average $2,083.70 per week, and all employees average total earnings $1,579.20 per week. These are averages, not minimums. Salary packaging may affect your taxable income but not these averages.
Award rate: If you are covered by a modern award, your minimum is set by the award classification. For example, the award backstop rate is $26.44 per hour ongoing, with an introductory rate of $25.74 per hour for the first six months. Award rates rise by 4.75% from the first full pay period on or after 1 July 2026, but cannot fall below the national minimum.
Negotiated salary: Your employer may offer a salary above the minimum. Salary packaging can be applied to that higher salary, but the cash component must still meet the minimum.

Super Guarantee on Top

Employers must pay super guarantee of 12% on your ordinary time earnings (OTE). This is on top of your cash salary. Salary packaging for living expenses (other than super contributions) does not reduce OTE for super purposes. For example, if you salary package $5,000 for car expenses, your OTE remains your gross salary before sacrifice, and your employer must pay 12% super on that full amount. However, if you salary package into super, that amount is still counted as OTE for super guarantee purposes.

Junior and Apprentice Rates

If you are under 21 and award-free, junior percentage rates apply. For example, a 19-year-old earns 82.5% of the adult rate, or $21.82 per hour ($27.28 casual). Salary packaging cannot reduce these cash rates below the junior minimum. Apprentices and trainees follow the Miscellaneous Award rates, not the junior percentages. Always check your specific situation.

Internal Resources

For more details on which minimum wage applies to you, see Which minimum wage applies. To compare rates across awards and classifications, visit Rate tables.

Key Takeaways

Salary packaging living expenses can reduce your taxable income but cannot reduce your cash pay below the minimum wage.
The national minimum wage from 1 July 2026 is $26.44 per hour or $1,004.90 per week.
Super guarantee is paid on your ordinary time earnings, which is generally your gross salary before salary sacrifice.
If you are covered by an award or enterprise agreement, that higher rate is your minimum.
Always ensure your cash wage meets the legal floor; if in doubt, contact the Fair Work Ombudsman for guidance.

This article provides orientation only and is not legal or tax advice. Consult a qualified professional for your circumstances.

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