Can salary sacrifice reduce my pay below the minimum wage?

No. The Fair Work Ombudsman states that the minimum wage is the amount of pay before tax is taken out (gross pay). Salary sacrifice reduces your taxable income but cannot reduce the gross cash wage below the applicable minimum – whether that is the national minimum wage, a modern award rate, or an enterprise agreement rate. Your employer must still pay at least the minimum in cash or as a non-cash benefit that counts as wages under the Fair Work Act.

What items can be salary sacrificed?

Common salary sacrifice items include additional superannuation contributions, cars (under a novated lease), laptops, phones, and some fringe benefits. However, not all items are allowed under every employer's salary sacrifice policy, and there are limits set by the ATO for certain benefits. Importantly, salary sacrifice cannot be used to avoid paying the minimum wage – the base rate must still meet the legal minimum. Check your award or agreement for any specific rules about salary sacrifice.

What Can Be Salary Sacrificed? Understanding Salary Sacrifice and Minimum Wage Compliance in Australia

Q: Does salary sacrifice affect my super guarantee?

Yes, but not in the way you might think. The Australian Taxation Office explains that salary sacrificed amounts to superannuation are still considered ordinary time earnings (OTE) for the purposes of the super guarantee, provided the sacrificed salary would otherwise have been OTE. This means your employer must still pay the 12% super guarantee on the sacrificed amount. However, salary sacrifice for other items (e.g., a car) may reduce your OTE and therefore your super, unless the award or agreement requires super on those amounts.

The national minimum wage from 1 July 2026 is $26.44 per hour or $1,004.90 per week for award-free adult employees, but salary sacrifice arrangements cannot reduce your cash pay below this floor.

What Can Be Salary Sacrificed? A Guide to Salary Sacrifice and Minimum Wage Rules

If you are an employee in Australia, you may have heard about salary sacrifice – an arrangement where you give up part of your pre-tax salary in exchange for a benefit such as extra super contributions, a car, or electronic devices. But what can be salary sacrificed, and how does it affect your minimum wage entitlements? This guide explains the rules using official sources from the Fair Work Ombudsman, the Fair Work Commission, and the Australian Taxation Office.

The Legal Minimum Wage and Salary Sacrifice

The Fair Work Ombudsman makes clear that the minimum wage is the amount of pay before tax is taken out – your gross pay. This means that salary sacrifice cannot reduce your cash wage below the legal minimum. For award-free adult employees, the national minimum wage from 1 July 2026 is $26.44 per hour or $1,004.90 per week (based on 38 ordinary hours). If you are covered by a modern award, the award rate is your minimum, and it may be higher than the national minimum. An enterprise agreement can also set a higher rate. In all cases, the base rate you receive – whether in cash or as a non-cash benefit – must meet the applicable minimum.

What the ATO Says About Salary Sacrifice and Super

The Australian Taxation Office provides a detailed list of payments that count as ordinary time earnings (OTE) for super guarantee purposes. According to the ATO, salary sacrificed amounts to superannuation are still OTE if the sacrificed salary would otherwise have been OTE. This means your employer must pay the 12% super guarantee on the sacrificed amount. However, salary sacrifice for other benefits (such as a car or laptop) may reduce your OTE and therefore your super, unless your award or agreement requires super on those amounts. The ATO also notes that how you work out OTE might be impacted if your employee has a salary sacrifice arrangement in place – so it is important to check the rules carefully.

Award Coverage vs Award-Free Rates

Your minimum wage depends on whether you are covered by a modern award or enterprise agreement. Most private-sector employees in the national system are covered by an award. If you are award-free, the national minimum wage applies. Salary sacrifice cannot be used to drop below either floor. For example, if you are on an award with a rate of $28.00 per hour, your gross pay (including any salary sacrifice benefit) must be at least $28.00 per hour. The Fair Work Commission sets the national minimum wage, and the Fair Work Ombudsman explains and enforces it. Which minimum wage applies can help you determine your correct pay floor.

How Salary Sacrifice Interacts with Different Pay Types

Salary sacrifice arrangements can affect casual loading, overtime, and penalty rates. For casual employees, the 25% loading is part of the minimum wage – salary sacrifice cannot reduce that loading. For juniors, apprentices, and trainees, special minimum wages apply. For example, a 17-year-old award-free junior earns $15.29 per hour (57.8% of the adult rate) plus casual loading if applicable. Salary sacrifice must still ensure the cash component meets that percentage. Introductory rates under some awards are also protected: from 1 July 2026, the lowest ongoing classification cannot sit under the national minimum, and an introductory rate limited to the first six months cannot sit under $25.74 per hour or $978.10 per week.

The Role of Enterprise Agreements

Enterprise agreements can include salary sacrifice provisions, but they cannot undercut the minimum wage. The Fair Work Ombudsman advises that if you are covered by an enterprise agreement, check the agreement for the minimum pay rates. The agreement may allow salary sacrifice for certain benefits, but the base rate must still meet the award or national minimum. Guides on our site provide more detail on how agreements interact with salary sacrifice.

Key Takeaways

Salary sacrifice cannot reduce your gross pay below the legal minimum wage – whether that is the national minimum, an award rate, or an agreement rate.
Salary sacrificed to super is still OTE for super guarantee purposes, so your employer must pay super on it.
For other salary sacrifice items, your OTE may decrease, potentially reducing your super unless your award says otherwise.
Always check your award or agreement for specific rules about salary sacrifice. The Fair Work Ombudsman and ATO are the key sources for compliance.

Understanding what can be salary sacrificed helps you make informed decisions about your pay and benefits while staying within the law. If you are unsure about your minimum wage, use the Which minimum wage applies tool or consult the Fair Work Ombudsman.

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