Can salary packaging reduce my pay below the minimum wage?

No. Salary packaging (also called salary sacrifice) is an agreement to exchange part of your salary for a benefit, such as a car or additional super contributions. The cash component of your pay after the sacrifice must still meet the applicable minimum wage, award rate, or enterprise agreement rate. The Fair Work Ombudsman enforces this rule. For award-free adult employees, the cash pay cannot fall below $26.44 per hour or $1,004.90 per week (from 1 July 2026).

Does salary packaging affect my super guarantee?

Yes, but only if the salary sacrifice is for a benefit that is not ordinary time earnings (OTE). Generally, super guarantee is calculated on your ordinary time earnings before salary sacrifice. However, if you sacrifice salary into super, that sacrificed amount is still OTE and the employer must pay 12% on top. For other benefits like a car, the sacrificed amount may reduce OTE, lowering the super contribution. Check with the ATO or your employer.

Is salary packaging available to all workers?

Salary packaging is most common in not-for-profit, public sector, and certain private sector roles. It is not a right under the Fair Work Act; it depends on your employer's policy and any applicable award or agreement. Even if offered, the arrangement must not cause your cash pay to drop below the legal minimum. Award-free juniors, apprentices, and trainees have lower minimum rates, but salary packaging still cannot push cash pay under those lower floors.

What Is Salary Packaging and How Does It Affect Your Minimum Wage?

The national minimum wage from 1 July 2026 is $26.44 per hour ($1,004.90 per week), and salary packaging cannot reduce your cash pay below this floor.

What Is Salary Packaging and How Does It Relate to Your Pay Floor?

Salary packaging, also known as salary sacrifice, is an arrangement where you agree to receive part of your pre-tax salary as a benefit instead of cash. Common examples include a car, laptop, or additional super contributions. While salary packaging can reduce your taxable income, it does not change the legal requirement that your cash pay must meet the minimum wage, award rate, or enterprise agreement rate that applies to you.

The Legal Minimum Wage Floor

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 loading of 25%, giving a casual rate of $33.05 per hour. These figures are set by the Fair Work Commission and enforced by the Fair Work Ombudsman. If you are covered by a modern award, the lowest ongoing classification cannot fall below the national minimum, and an introductory rate (first six months) is capped at $25.74 per hour or $978.10 per week. Award-free juniors have percentage-based rates (e.g., under 16: $9.73 per hour).

Salary packaging cannot reduce your cash pay below these floors. For example, if you earn $30 per hour under an award and sacrifice $5 per hour for a car, your cash pay becomes $25 per hour – which would be illegal if it falls below the award or minimum wage. Always check that the cash component remains compliant.

How Salary Packaging Interacts with Super Guarantee

Employers must pay super guarantee of 12% on top of your ordinary time earnings (OTE). OTE generally includes your salary before any salary sacrifice for non-super benefits. If you sacrifice salary into super, that amount remains OTE and the employer must pay super on it. But if you sacrifice for a car or other benefit, the sacrificed amount may reduce OTE, potentially lowering the super contribution. The ATO provides guidance on what counts as OTE.

Separating the Legal Minimum from Other Pay Concepts

It is important to distinguish the legal minimum from survey averages, award rates, and negotiated salaries. The national minimum wage is the absolute floor. Award rates are higher for many industries and occupations. Enterprise agreements can set rates above the award. The ABS May 2026 survey reports full-time adult ordinary-time earnings of $2,083.70 per week – far above the minimum. Salary packaging is a negotiation between you and your employer; it does not change these benchmarks.

Award-Free Workers and Salary Packaging

If you are award-free and not covered by an agreement, your minimum is the national minimum wage (or junior rate if applicable). Salary packaging is optional and must be agreed in writing. The Fair Work Ombudsman advises that salary sacrifice arrangements cannot result in you receiving less than the minimum wage in cash. For award-free juniors, the same principle applies: cash pay after sacrifice must meet the junior percentage rate.

Internal Resources

For more on which minimum wage applies to you, see Which minimum wage applies. To compare your current pay against award rates, visit Rate tables.

Common Misunderstandings

Salary packaging does not reduce your minimum wage entitlement. The cash pay must still meet the legal floor.
Super is an employer payment on top of your ordinary time earnings, not a deduction from your salary.
Salary packaging is not available to every worker; it depends on your employer's policy.

FAQs

(Three FAQs are provided in the faqs array above.)

Final Note

This guide 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. The figures cited are from the Fair Work Commission and the ABS as noted in the on-site reference.

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