Can I salary sacrifice my mortgage? Understanding pay floors and salary packaging

Can I salary sacrifice my mortgage? Pay floors and salary packaging explained

If you have asked yourself 'can i salary sacrifice my mortgage', you are likely exploring salary packaging to reduce your taxable income. While salary sacrifice is a legitimate arrangement for certain benefits, mortgage payments are not typically eligible under Australian tax law. More importantly for this site, any salary sacrifice arrangement must not cause your cash wage to fall below the legal minimum pay floor.

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 25% loading, making the casual minimum $33.05 per hour. These rates are set by the Fair Work Commission and apply to national-system employees who are award-free and agreement-free. The Fair Work Ombudsman explains and enforces these rates.

On top of the cash wage, your employer must pay the super guarantee of 12% of your ordinary time earnings. This is a separate payment and cannot be counted towards the minimum wage.

Award rates and higher pay floors

If you are covered by a modern award, your minimum wage is likely higher than the national minimum. From the first full pay period on or after 1 July 2026, modern award minimum wages rose by 4.75%. However, the lowest ongoing classification in an award cannot sit under the national minimum of $26.44 per hour. Introductory rates (for the first six months) are capped at $25.74 per hour or $978.10 per week.

Some workers are entitled to lower rates under awards or agreements. Juniors, apprentices, trainees, and supported wage employees may receive less than the adult rate. For award-free juniors, the percentages range from 36.8% for under 16 ($9.73 per hour) to 97.7% for 20-year-olds ($25.84 per hour). Apprentice and trainee rates for award-free employees follow the Miscellaneous Award, not the junior percentages.

Survey averages vs legal floors

The Australian Bureau of Statistics (ABS) reported in May 2026 that full-time adult ordinary-time earnings averaged $2,083.70 per week, while all employees averaged $1,579.20 per week. These are survey averages, not legal entitlements. Your negotiated salary or enterprise agreement rate may be above the minimum but cannot be below it.

Salary sacrifice and your pay

Salary sacrifice is an arrangement where you forgo part of your cash salary in exchange for a non-cash benefit. The ATO allows this for superannuation, cars (via novated lease), laptops, and some other items, but not for personal mortgage repayments. If your employer offers a valid salary sacrifice arrangement, your cash wage must still meet the minimum wage or award rate. The sacrificed amount is treated as employer-provided benefits and is subject to fringe benefits tax in some cases.

Your super guarantee is calculated on your ordinary time earnings, which includes the salary sacrificed amount. So your employer must pay 12% super on the full amount, not just your reduced cash salary.

Award coverage and enterprise agreements

If you are covered by a modern award or an enterprise agreement, that document sets your minimum pay and conditions. An enterprise agreement can require a higher rate than the award or national minimum. Always check your award classification or agreement to know your exact pay floor. For more guidance, see Which minimum wage applies and Rate tables.

Final points

• Salary sacrifice for mortgage is not a standard option. Seek professional tax advice if you are considering salary packaging.
• Your cash wage cannot fall below the legal minimum, regardless of any salary sacrifice arrangement.
• The national minimum wage figures here apply from 1 July 2026. Earlier rates are available in our Guides.
• This site provides orientation only. It is not a pay determination, tax advice, or legal advice.