Salary packaging rent and the national minimum wage: a practical check

Salary packaging rent and your minimum wage rights

Salary packaging rent is a common way for employees in not-for-profit organisations, charities, and some public sector roles to reduce their taxable income by directing part of their pre-tax salary towards rent payments. While this can boost your take-home pay, it does not change the fundamental obligation your employer has to pay at least the legal minimum wage. This guide explains how to check your pay against the national minimum wage and award rates, and why salary packaging rent does not affect that floor.

The national minimum wage from 1 July 2026

The Fair Work Commission sets the national minimum wage each year. From the first full pay period on or after 1 July 2026, the adult national minimum wage is:

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

Your employer must pay superannuation guarantee of 12% on top of your ordinary time earnings. This is a separate payment to your super fund, not part of your hourly rate.

These figures apply to national-system employees who are not covered by a modern award or enterprise agreement. Most private-sector employees are in the national system. Some state public sector and local government employees, and some Western Australian sole traders and partnerships, may be in the state system and covered by state awards.

How salary packaging rent fits in

Salary packaging rent is a voluntary arrangement where you agree to sacrifice part of your gross salary in exchange for your employer paying your rent directly. This reduces your assessable income for tax purposes. However, the amount you sacrifice cannot reduce your base hourly rate below the legal minimum. The Fair Work Ombudsman explains that salary sacrifice arrangements must not result in you receiving less than the minimum wage or award rate for the work you perform.

If you are on salary packaging rent, check your employment contract or pay slip for your ordinary hourly rate before any sacrifice. That rate must be at least the national minimum wage or the applicable award classification rate, whichever is higher.

Award rates and enterprise agreements

Many employees are covered by a modern award. From the first full pay period on or after 1 July 2026, modern award minimum wages rise by 4.75%, but the lowest ongoing classification cannot sit under the national minimum of $26.44 per hour. An introductory rate (for the first 6 months in a job) cannot sit under $25.74 per hour or $978.10 per week. If your award has a higher rate for your classification, that is your minimum.

Enterprise agreements can also set higher rates than the award or national minimum. If you are covered by an agreement, your base rate must be at least the agreement rate. Salary packaging rent does not allow your employer to pay below that.

Juniors, apprentices, and trainees

Not every worker must receive $26.44 per hour. Junior employees (under 21) who are award-free have percentage-based minimums:

• Under 16: $9.73 per hour (casual $12.16)
• 16: $12.51 per hour (casual $15.64)
• 17: $15.29 per hour (casual $19.11)
• 18: $18.06 per hour (casual $22.58)
• 19: $21.82 per hour (casual $27.28)
• 20: $25.84 per hour (casual $32.30)
• 21 and over: $26.44 per hour (casual $33.05)

Apprentices and trainees who are award-free follow the Miscellaneous Award rates, not the junior percentages. Salary packaging rent is still possible for these workers, but the same rule applies: the base rate before sacrifice must meet the legal minimum.

Practical check: compare your hourly rate

To see if your pay meets the legal floor, follow these steps:

1. Find your ordinary hourly rate from your pay slip or employment contract. This is the rate before any salary sacrifice, overtime, or allowances.
2. If you are covered by a modern award, look up the classification rate in the Rate tables on this site. Use the rate that applies to your job and experience level.
3. If you are award-free, use the national minimum wage of $26.44 per hour (adult) or the junior percentage if under 21.
4. If your ordinary rate is lower than the applicable minimum, your employer may be underpaying you. Contact the Fair Work Ombudsman for advice.

Remember that salary packaging rent reduces your taxable income but does not change the minimum your employer must pay. Your gross ordinary rate (before sacrifice) is the figure to check.

What about the ABS average earnings?

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 averages, not minimums. Your pay may be below the average and still be legal if it meets the minimum wage or award rate. Salary packaging rent can help you keep more of your income, but it does not raise the floor.

Tax considerations

Salary packaging rent is governed by the ATO's rules for fringe benefits tax (FBT) and salary sacrifice. For the 2026-27 tax year, resident rates with the full tax-free threshold apply. Medicare is estimated at 2% once annualised ordinary gross reaches $30,000. The low-income reduction uses ATO shade-in thresholds. This model leaves out the low income tax offset, HELP, salary sacrifice, and the Medicare levy surcharge. Always seek professional tax advice for your situation.

More resources

• Which minimum wage applies – a guide to finding your correct pay floor.
• Guides – detailed explanations of award coverage, juniors, and salary packaging.
• How the figures work – methodology for the national minimum wage and award rates.

FAQs

Does salary packaging rent affect my minimum wage entitlement? No. Salary packaging rent is a tax-effective arrangement that reduces your taxable income, but it does not change the minimum wage you must receive. Your employer must still pay at least the national minimum wage (or the applicable award or enterprise agreement rate) before any salary sacrifice deductions. The Fair Work Ombudsman enforces the minimum wage, not the ATO's salary packaging rules.

Can my employer use salary packaging rent to pay me less than the award rate? No. Salary packaging cannot reduce your base pay below the legal minimum. If you are covered by a modern award, your ordinary hourly rate must be at least the award classification rate. Salary packaging rent is a voluntary agreement to sacrifice part of your pre-tax salary for a benefit; it cannot bring your cash wage under the minimum. The Fair Work Commission sets award rates, and the Ombudsman ensures compliance.

How do I check if my hourly rate is above the national minimum when I have salary packaging rent? Compare your gross ordinary hourly rate (before any salary sacrifice) to the national minimum wage of $26.44 per hour (from 1 July 2026). If you are award-free and agreement-free, that is the floor. If you are under an award, use the award classification rate. Salary packaging rent reduces your taxable income but does not lower the rate your employer must pay. Use the Rate tables on this site for award rates.