Can salary packaging reduce my hourly rate below the minimum wage?

No. Your cash pay after salary sacrifice must be at least the national minimum wage (or higher if you are covered by a modern award or enterprise agreement). The Fair Work Ombudsman enforces that salary packaging cannot result in you receiving less than the applicable minimum rate.

Does salary packaging affect super guarantee contributions?

Generally, super guarantee is calculated on your ordinary time earnings before salary sacrifice, so your employer must contribute 12% on the full amount. However, if you sacrifice into super, those contributions may count towards the employer's super guarantee obligation. The Australian Taxation Office provides detailed rules.

Are there limits on salary packaging for award-covered employees?

Yes. If you are covered by a modern award, your cash pay cannot fall below the award rate. Salary packaging must not breach the minimum conditions of the award. Enterprise agreements may also set higher floors that must be respected.

Salary Packaging Options Australia: How They Affect Your Minimum Wage and Super

Salary packaging cannot reduce your cash pay below the national minimum wage of $26.44 per hour (from 1 July 2026), and super guarantee of 12% is paid on top of ordinary time earnings.

Understanding Salary Packaging and the Minimum Wage

Salary packaging (also known as salary sacrifice) is a common option in Australia where an employee agrees to exchange part of their pre-tax salary for benefits such as a car, laptop, or additional super contributions. This can reduce your taxable income, but it must not result in you receiving less than the legal minimum pay floor. The national minimum wage from 1 July 2026 is $26.44 per hour or $1,004.90 per week for a full-time adult employee. Casual employees receive a loading, making the casual minimum $33.05 per hour. These figures are set by the Fair Work Commission and enforced by the Fair Work Ombudsman.

When you enter a salary packaging arrangement, your employer must still ensure that the cash component of your pay (after the sacrifice) is at least the minimum wage. For example, if you are an adult award-free employee earning $30 per hour, you could sacrifice up to $3.56 per hour into benefits, but the cash left must be at least $26.44. If you are covered by a modern award, the award rate is likely higher than the national minimum, and your cash pay cannot fall below that award rate either. Enterprise agreements may also set higher rates.

How Salary Packaging Interacts with Award Rates and Agreements

Many employees are covered by a modern award or enterprise agreement. These instruments often specify minimum pay rates that are higher than the national minimum. For instance, the lowest ongoing classification in a modern award from 1 July 2026 cannot be less than $26.44 per hour, but many awards have rates above that. Salary packaging options must respect these higher floors. If your award rate is $28 per hour, you cannot sacrifice so much that your cash pay drops below $28. The Fair Work Ombudsman provides guidance that salary sacrifice arrangements cannot result in an employee receiving less than the applicable minimum wage or award rate.

For award-free junior employees, the minimum rates are lower (e.g., under 16: $9.73 per hour). Salary packaging could potentially reduce cash pay to that level, but only if the junior is not covered by an award. However, it's important to note that junior rates are already low, and salary packaging may not be beneficial. Always check your specific circumstances.

Super Guarantee and Salary Packaging

The super guarantee requires employers to contribute 12% of an employee's ordinary time earnings (OTE) into a super fund. OTE generally includes salary sacrifice amounts, but there are complexities. For most salary packaging arrangements, the super guarantee is calculated on the employee's OTE before the sacrifice, meaning the employer must pay super on the full amount. However, if the salary sacrifice is for super contributions, the employer's super guarantee obligation may be satisfied by those contributions. The Australian Taxation Office (ATO) provides rules on this. Importantly, super is an employer payment on top of your salary, not deducted from it. So even if you salary package, your employer still owes the 12% super on your OTE.

Salary Packaging and Casual Loading

Casual employees receive a loading (typically 25%) in lieu of paid leave. The casual minimum wage from 1 July 2026 is $33.05 per hour. Salary packaging for casuals must not reduce the cash component below that rate. The loading is part of the minimum entitlement, so you cannot sacrifice the loading away. If you are casual and covered by an award, the award casual rate (including loading) is the floor.

Tax Implications and Salary Packaging

While salary packaging can reduce your taxable income, it does not change your minimum wage entitlement. The ATO sets rules on what benefits can be packaged and how they are taxed. For example, salary sacrificing into super is generally taxed at 15% within the fund, which can be lower than your marginal rate. However, this guide does not provide tax advice. The figures in our reference show that for a resident earning above $30,000, Medicare levy of 2% applies. Salary packaging may affect your taxable income and thus your Medicare levy and low-income offsets. Consult a tax professional.

Internal Links

For more details on which minimum wage applies to you, see Which minimum wage applies. For comprehensive rate tables including award rates and junior percentages, see Rate tables.

Conclusion

Salary packaging options in Australia can be a valuable way to structure your pay, but they must always comply with the legal minimum wage and any applicable award or agreement. The cash you receive cannot fall below the relevant floor, and super guarantee is paid on top. Always check your specific situation with your employer or a professional.

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