Is salary packaging worth it? Comparing your weekly packet with the national minimum wage

Is salary packaging worth it? Understanding your weekly packet

When you ask "is salary packaging worth it", you are really asking whether swapping some of your cash salary for non-cash benefits (like a car, super contributions, or electronic devices) leaves you better off after tax. The answer depends on how your pay compares with the legal minimum wage, because salary packaging cannot reduce your cash pay below that floor.

The legal minimum: your pay floor

The Fair Work Commission sets the national minimum wage. From 1 July 2026, the adult rate is $26.44 per hour or $1,004.90 per week for a 38‑hour ordinary week. On top of that, your employer must pay super guarantee of 12% of your ordinary time earnings – that is an extra $120.59 per week if you earn the minimum. These figures apply to national‑system employees who are not covered by a modern award or enterprise agreement. If you are covered by an award, your minimum rate may be higher, and your award or agreement can also set a higher rate than the national minimum.

Important: juniors, apprentices, trainees, and employees on introductory award rates can be paid less. For example, an award‑free junior aged 18 earns $18.06 per hour (68.3% of the adult rate). But the cash floor is still the relevant minimum for that classification.

How salary packaging interacts with the minimum

Salary packaging (also called salary sacrifice) is an arrangement where you agree to receive part of your pre‑tax salary as a benefit instead of cash. This reduces your taxable income, so you pay less income tax and Medicare levy. However, the Fair Work Ombudsman makes clear that a salary sacrifice arrangement cannot result in you receiving less than the relevant minimum wage in cash. In other words, your cash pay after the sacrifice must still be at least $26.44 per hour (or your award rate, if higher).

Therefore, if you are earning exactly the minimum wage, salary packaging is not possible – you have no cash to sacrifice. If you earn above the minimum, you can package some of the excess, but you must keep enough cash to stay above the floor. For example, if your base salary is $30.00 per hour, you could sacrifice up to $3.56 per hour worth of benefits without dropping below $26.44.

Tax and Medicare on your weekly packet

The benefit of salary packaging comes from the tax saved. For the 2026‑27 income year, resident tax rates apply with the full tax‑free threshold. Medicare levy is 2% once your annualised ordinary gross income exceeds $30,000. If you earn the average full‑time adult ordinary‑time earnings of $2,083.70 per week (ABS, May 2026), your annual income is about $108,352. After tax and Medicare, your take‑home cash is significantly less. By packaging a benefit worth, say, $100 per week, you reduce your taxable income by $100, so you pay less tax. But you also lose that $100 in cash – you are swapping cash for a non‑cash benefit. The net benefit depends on the type of benefit – some are exempt from fringe benefits tax (like super above the guarantee) or concessional (like cars). The ATO provides detailed rules.

However, for a minimum‑wage earner, the tax saved is small because their income is low. The real value of salary packaging is for those on higher incomes who can reduce their marginal tax rate.

Super on top

Remember that super guarantee is paid on your ordinary time earnings. If you salary‑sacrifice into super, those contributions are included in ordinary time earnings, so your employer still pays 12% super on that amount. If you sacrifice for other benefits (e.g., a car), the sacrificed amount may not be part of ordinary time earnings, so your super base could be lower. Always check with your employer or a tax adviser.

Award rates and enterprise agreements

If you are covered by a modern award or enterprise agreement, your minimum cash rate is likely higher than the national minimum. Salary packaging must still not reduce your cash below that award rate. Also, some awards have specific rules about salary sacrifice. Always consult your award or agreement.

Is it worth it?

For someone on the minimum wage, salary packaging is generally not worth it because you cannot reduce your cash below the floor. For someone on average earnings or higher, it can reduce tax, but you need to consider the type of benefit, fringe benefits tax, and your personal goals. This site does not provide tax advice – speak to a qualified professional.

For more on which minimum applies to you, see Which minimum wage applies. For current rates, see Rate tables.

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