How a salary sacrifice scheme interacts with Australia’s minimum wage

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

A salary sacrifice scheme is an arrangement where you agree to forgo part of your pre‑tax salary in return for benefits such as additional superannuation contributions, a motor vehicle, or electronic devices. While this can reduce your taxable income, it does not change the legal obligation your employer has to pay at least the minimum wage. This guide explains how the national minimum wage, modern award rates, and enterprise agreements interact with salary sacrifice.

The legal minimum wage floor

The Fair Work Commission sets the national 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 ordinary week. Casual employees receive a 25% loading, making the casual rate $33.05 per hour. These figures apply to national‑system employees who are not covered by a modern award or enterprise agreement.

A salary sacrifice scheme cannot reduce your cash or in‑kind remuneration below this floor. The employer must pay at least the minimum wage in cash (or a combination of cash and benefits that the employee genuinely values) before any sacrifice arrangement takes effect. If the total value of your package falls below the minimum, the arrangement is unlawful.

Award rates and salary sacrifice

Many employees are covered by a modern award, which sets minimum pay rates that are often higher than the national minimum. For example, the lowest ongoing classification under a modern award from 1 July 2026 cannot be less than $26.44 per hour (the award backstop). Introductory rates for the first six months are capped at $25.74 per hour or $978.10 per week.

If you are award‑covered, your salary sacrifice scheme must not result in you receiving less than the award rate. The award’s minimum wage, penalty rates, allowances, and other conditions are a floor that cannot be traded away through salary sacrifice. The Fair Work Ombudsman enforces these rules. For more detail on which award applies to you, see our Which minimum wage applies guide.

Enterprise agreements and negotiated salaries

Enterprise agreements can set higher rates than the award or national minimum. If you are covered by an agreement, your salary sacrifice arrangement must still respect the agreement’s minimum rates. A negotiated salary above the award can include salary sacrifice components, but the cash component must be sufficient to meet the base rate under the agreement.

Super guarantee is paid on top

Employers must pay superannuation guarantee contributions of 12% on ordinary time earnings (from 1 July 2026). This is an additional cost to the employer, not deducted from your salary. If you salary sacrifice into super, those sacrificed amounts are generally included in ordinary time earnings for super guarantee purposes, but the employer’s 12% obligation remains on top of your base salary. The ATO provides guidance on how salary sacrifice interacts with super.

Junior, apprentice, and supported wages

Not every worker receives the adult minimum. Award‑free juniors are paid a percentage of the adult rate based on age. For example, a 17‑year‑old receives $15.29 per hour (57.8% of $26.44), and a casual 17‑year‑old receives $19.11 per hour. Apprentices and trainees have their own rates under the Miscellaneous Award. A salary sacrifice scheme cannot reduce these already lower rates. The same principle applies: the minimum wage floor must be met in cash or genuine benefits.

ABS average earnings for context

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 figures are much higher than the minimum wage and reflect the broad labour market. Salary sacrifice is more common among higher earners, but it is available to any employee who agrees with their employer. The ABS does not publish a specific average for salary sacrifice arrangements.

Important cautions

• Salary sacrifice does not reduce your employer’s obligation to pay the minimum wage, award rate, or super guarantee.
• The arrangement must be voluntary and documented.
• Some benefits (e.g., a car) may have fringe benefits tax implications for the employer.
• This site does not provide tax advice. Consult the ATO or a qualified professional for your personal circumstances.

For more information, see our Rate tables and Guides sections. Remember that a modern award or enterprise agreement can set a higher rate than the national minimum, and your salary sacrifice must not breach that higher floor.