Salary sacrifice childcare fees and the minimum wage: what you need to know

Salary sacrifice childcare fees and the minimum wage

Salary sacrifice for childcare fees is a common arrangement where an employee agrees to forgo part of their pre-tax salary in exchange for the employer paying childcare costs directly. This can reduce taxable income and may lower the employee's overall tax bill. However, it is important to understand how this interacts with Australia's minimum wage system, award rates, and superannuation guarantee obligations.

The legal minimum pay floor

From 1 July 2026, the national minimum wage is $26.44 per hour for adult employees not covered by an award or agreement. For a full-time worker (38 ordinary hours per week), this equates to $1,004.90 per week. Casual employees receive a loading of 25%, making the casual minimum $33.05 per hour. These figures are set by the Fair Work Commission and enforced by the Fair Work Ombudsman.

Salary sacrifice for childcare fees does not change this minimum. The employer must still pay at least the applicable minimum wage in cash before any salary sacrifice deduction is applied. The sacrifice is a voluntary redirection of already-earned wages, not a reduction in the wage rate itself.

Award rates and salary sacrifice

Many employees are covered by a modern award, which sets minimum pay rates for their industry or occupation. Award rates are generally higher than the national minimum wage. For example, the lowest ongoing classification under a modern award cannot fall below $26.44 per hour, and introductory rates (first six months) are $25.74 per hour. If you are award-covered, your employer must pay at least the award rate. Salary sacrifice cannot reduce your cash pay below that award rate. The Fair Work Ombudsman explains that salary sacrifice is a post-pay arrangement; the minimum wage or award rate must be paid in full.

Junior rates and supported wages

Not all workers receive the adult minimum. Award-free juniors (under 21) are paid a percentage of the adult rate. For example, a 17-year-old receives 57.8% of $26.44, which is $15.29 per hour (casual $19.11). Apprentices and trainees have their own rates under the Miscellaneous Award. Salary sacrifice for childcare fees is still possible for these workers, but the same rule applies: the cash pay after sacrifice cannot fall below the applicable junior or trainee minimum.

Super guarantee on top

Employers must pay superannuation guarantee contributions of 12% (from 1 July 2026) on ordinary time earnings. Importantly, super is calculated on the employee's ordinary time earnings before any salary sacrifice. So if you sacrifice $100 per week for childcare, your employer still pays super on your full ordinary earnings, not the reduced amount. This is a legal requirement under the Superannuation Guarantee (Administration) Act 1992. Always check your payslip to confirm super is being paid correctly.

How salary sacrifice compares with other pay concepts

It is essential to separate the legal minimum from other figures:

• Legal minimum: The national minimum wage or award rate is the floor. Salary sacrifice does not change this floor.
• Survey averages: The Australian Bureau of Statistics (ABS) reports average weekly earnings. In May 2026, full-time adult ordinary-time earnings were $2,083.70 per week, and all employees average total earnings were $1,579.20 per week. These are not minimums and are not affected by salary sacrifice.
• Award rates: As noted, award rates set the minimum for many workers. Salary sacrifice must not breach these.
• Negotiated salary: Above-minimum salaries can be structured with salary sacrifice, but the arrangement must comply with the Fair Work Act.

Practical considerations

If you are considering salary sacrifice for childcare fees, discuss it with your employer and ensure the arrangement is documented. The Australian Taxation Office (ATO) has rules about what can be salary sacrificed and the effect on fringe benefits tax. This site does not provide tax advice; consult a qualified professional.

For more information on which minimum wage applies to you, see our Which minimum wage applies guide. You can also browse Rate tables for current award and national minimum figures.

Summary

Salary sacrifice for childcare fees is a tax-effective way to pay for childcare, but it does not reduce your minimum wage entitlement. The legal floor remains the national minimum wage or your award rate, and super guarantee is calculated on pre-sacrifice earnings. Always ensure your pay meets the minimum requirements before any sacrifice is applied.

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