Can salary packaging reduce my minimum wage entitlement?

No. Under the Fair Work Act, salary sacrifice arrangements cannot reduce your base rate of pay below the relevant minimum wage – whether that is the national minimum wage or a higher award rate. The base rate must remain at or above the legal floor.

Does salary packaging affect my superannuation guarantee?

Generally, salary sacrifice amounts are included in your ordinary time earnings for super guarantee purposes. Your employer must still pay the 12% super guarantee on top of your ordinary time earnings, including any sacrificed amounts, unless a specific exemption applies.

How does salary packaging work if I'm covered by an award?

If you are covered by a modern award, your minimum pay rates (including penalties and allowances) are set by that award. Salary packaging can be offered as a voluntary arrangement on top of your award entitlements, but it cannot reduce the award rate you are legally entitled to receive in cash.

Smart Salary Packaging and the Minimum Wage: Award Coverage vs Award-Free Rates

The national minimum wage from 1 July 2026 is $26.44 per hour or $1,004.90 per week, but salary packaging cannot reduce your base pay below this floor.

Smart Salary Packaging and the Minimum Wage

Smart salary packaging is a way to structure your pay so that certain expenses – such as a car, laptop, or super contributions – are paid from your pre-tax salary. While this can reduce your taxable income, it does not change the legal minimum amount you must be paid for the work you do. This guide explains how salary packaging interacts with Australia's minimum wage system, whether you are covered by an award or are award-free.

The Legal Minimum: Award-Free Employees

For employees not covered by a modern award or enterprise agreement, the national minimum wage applies. As of 1 July 2026, the Fair Work Commission set this at $26.44 per hour or $1,004.90 per week for a 38-hour week. Casual employees receive a 25% loading, bringing the casual rate to $33.05 per hour. These rates are the absolute floor – your base pay cannot fall below them, even if you use smart salary packaging.

However, not every worker must receive $26.44 an hour. Award-free juniors, apprentices, trainees, and employees with a disability may be paid a lower special national minimum wage. For example, a 17-year-old award-free junior is entitled to 57.8% of the adult rate, or $15.29 per hour. Salary packaging cannot reduce these already lower rates.

Award Coverage: Higher Minimums Apply

Most Australian employees are covered by a modern award. The Fair Work Ombudsman explains that awards set minimum pay rates for specific industries and occupations, which are often higher than the national minimum wage. From 1 July 2026, award minimum wages increased by 4.75%, but the lowest ongoing classification in any award cannot be less than $26.44 per hour or $1,004.90 per week. Introductory rates (for the first six months) must be at least $25.74 per hour or $978.10 per week.

If you are covered by an award, your employer must pay you at least the award rate. Smart salary packaging can be used to sacrifice part of your salary for benefits, but the cash component of your base rate must remain at or above the award minimum. The Fair Work Ombudsman's Pay and Conditions Tool can help you find the correct award rate for your job.

How Salary Packaging Affects Your Pay

Smart salary packaging is a voluntary agreement between you and your employer. It does not change the minimum wage you are entitled to receive. The base rate of pay – the amount before any salary sacrifice – must still meet the legal minimum. For example, if your award rate is $30 per hour, you could agree to sacrifice $5 per hour for a novated lease, but your employer must still pay you at least $30 per hour in total (including the sacrificed amount). The cash you receive may be lower, but the base rate cannot drop below the floor.

Superannuation guarantee contributions are calculated on your ordinary time earnings, which generally include salary sacrifice amounts. Your employer must pay 12% super on top of your ordinary time earnings, not on the reduced cash amount. This means salary packaging does not reduce your super entitlements.

Award-Free vs Award Coverage: Which Applies to You?

To know which pay floor applies, first check if you are covered by a modern award. The Fair Work Commission's website lists all awards. If no award covers your role, and you are not covered by an enterprise agreement, you are award-free and the national minimum wage applies. Even then, your employer may choose to pay more, but they cannot pay less.

Smart salary packaging is more common in award-free or enterprise agreement workplaces, but it can also be offered under awards if the award allows it. Always check your award or agreement for any rules about salary sacrifice. The Fair Work Ombudsman provides guidance on salary sacrifice arrangements.

Survey Averages vs Legal Minimums

It is important to separate the legal minimum from survey averages. The Australian Bureau of Statistics reported that in May 2026, full-time adult ordinary-time earnings averaged $2,083.70 per week. That is an average, not a minimum. Your negotiated salary may be higher or lower than the average, but it must never fall below the legal minimum. Smart salary packaging can be part of a negotiated package, but the base rate must still comply with the law.

Summary

The national minimum wage (award-free) is $26.44/h or $1,004.90/wk from 1 July 2026.
Award rates are higher and vary by industry.
Smart salary packaging cannot reduce your base rate below the applicable minimum.
Super is paid on top of ordinary time earnings, including sacrificed amounts.
Juniors, apprentices, and trainees may have lower minimums.

For more details, see our Which minimum wage applies guide or explore our Guides on pay and conditions.

Important Note

This information is for orientation only. It is not a pay determination, tax advice, or legal advice. Always consult the Fair Work Ombudsman or a qualified professional for your specific situation.

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