Can salary sacrificing a car reduce my minimum wage entitlement?

No. The Fair Work Ombudsman states that salary sacrifice arrangements cannot reduce your base rate of pay below the minimum wage set by your award or the National Minimum Wage. You must still receive at least the applicable minimum hourly or weekly rate in cash or equivalent, after accounting for any salary sacrifice.

How does salary sacrificing a car affect my super?

Salary sacrificed contributions to super are treated as employer contributions and are subject to the super guarantee (currently 12% of ordinary time earnings). Your employer must still pay the full super guarantee on your ordinary time earnings as if no salary sacrifice existed. The ATO confirms that salary sacrificed super contributions are not fringe benefits.

Is salary sacrificing a car available to award-covered employees?

Yes, award-covered employees can enter salary sacrifice arrangements, but the total remuneration package must still meet or exceed the minimum entitlements under the award, including base rates, allowances, and penalty rates. The arrangement cannot be used to circumvent award conditions.

Salary sacrificing a car: how it affects your minimum wage obligations

Salary sacrificing a car does not allow an employer to pay below the national minimum wage of $26.44 per hour or the applicable award rate.

What is salary sacrificing a car?

Salary sacrificing a car, also known as salary packaging a car, is an arrangement where you and your employer agree to reduce your pre-tax salary in exchange for your employer providing a car and covering its running costs. As the Australian Taxation Office explains, this can reduce your taxable income, meaning you pay less income tax. However, the fringe benefits tax (FBT) that your employer may have to pay can affect the overall benefit. The Moneysmart website notes that common benefits include cars, and the arrangement must be entered into before you perform the work.

How the minimum wage interacts with salary sacrifice

The Fair Work Ombudsman makes clear that all employees in Australia are entitled to a minimum wage. This is the minimum amount an employee can be paid for the work they do. When you salary sacrifice a car, you are exchanging part of your salary for a non-cash benefit. However, this does not mean your employer can pay you less than the minimum wage in cash. The Fair Work Ombudsman states that salary sacrifice arrangements cannot reduce your base rate of pay below the minimum wage set by your award or the National Minimum Wage. For award-free employees, the National Minimum Wage from 1 July 2026 is $26.44 per hour or $1004.90 per week. For casual employees, it is $33.05 per hour including the casual loading.

If you are covered by a modern award, your minimum pay rates are set out in that award. The award may have higher rates than the National Minimum Wage. Some awards have introductory rates for new employees, but these cannot fall below $25.74 per hour or $978.10 per week from 1 July 2026. Salary sacrificing a car does not allow you to be paid below these floors.

Award coverage vs award-free rates

The Fair Work Ombudsman's website explains that most employees are covered by an award or registered agreement. The award sets the minimum pay, including penalty rates and allowances. If you are award-free (not covered by any award or agreement), the National Minimum Wage applies. The on-site reference provides the current national minimum rates and the junior percentages for award-free employees under 21. For example, a 19-year-old award-free employee must be paid at least $21.82 per hour (or $27.28 casual). Salary sacrificing a car is a separate negotiation; it cannot bring your effective hourly rate below these minimums.

The Australian Bureau of Statistics reports that full-time adult ordinary-time earnings averaged $2083.70 per week in May 2026. This is well above the minimum wage. Salary sacrificing a car is most common among employees earning above the minimum, as the tax benefits are more significant at higher marginal tax rates.

Example from the Australian Taxation Office

The ATO provides a detailed example for an employee named Sam earning $65,000 per year. In one scenario, Sam salary sacrifices a car worth $35,000 with running costs of $11,500. Without salary sacrifice, Sam's net disposable income is $41,912. With salary sacrifice and employee contributions, it rises to $43,593. This illustrates that salary sacrificing a car can increase take-home pay, but only if the arrangement is structured correctly. Importantly, Sam's taxable income remains above the minimum wage threshold.

Super guarantee on top

When discussing pay, it's essential to remember that your employer must pay superannuation guarantee contributions on top of your ordinary time earnings. The current rate is 12% of your ordinary time earnings. Salary sacrificed super contributions are also subject to the super guarantee, but the employer must still pay the full 12% on your ordinary time earnings as if no salary sacrifice existed. The ATO confirms that salary sacrificed super contributions are employer contributions and are not fringe benefits.

Internal links

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

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