Non profit salary packaging and the minimum wage: what you need to know

Non profit salary packaging and the minimum wage

Non profit salary packaging is a popular way for employees of charities, hospitals, and other not-for-profit organisations to reduce their taxable income by paying for certain expenses with pre-tax dollars. But it’s important to understand how this arrangement interacts with Australia’s minimum wage laws. The legal pay floor is set by the Fair Work Commission, and salary packaging does not change your employer’s obligation to pay you at least that amount in cash.

The legal minimum wage

From 1 July 2026, the adult national minimum wage is $26.44 per hour or $1,004.90 per week for a full-time worker (38 ordinary hours). Casual employees receive a loading of 25%, making the casual minimum $33.05 per hour. These rates apply to award-free and agreement-free national-system employees. Most private-sector workers are covered by the national system, but some state public sector and local government employees may be under state awards.

If you are covered by a modern award or an enterprise agreement, your minimum wage may be higher than the national minimum. For example, the Social, Community, Home Care and Disability Services Industry Award (the SCHADS Award) often applies to non profit workers and has its own classification rates. The Fair Work Ombudsman explains and enforces these obligations.

How salary packaging fits in

Salary packaging (also called salary sacrifice) is an arrangement where you agree to forgo part of your cash salary in exchange for a benefit of equivalent value, such as a car, laptop, or additional super contributions. The packaged amount is deducted from your gross salary before tax, reducing your taxable income. However, the cash component of your salary must still meet the minimum wage. You cannot package your wage below the legal floor.

For example, if your award rate is $30 per hour, your employer must pay you at least $30 per hour in cash. If you salary package $5 per hour worth of benefits, your total remuneration might be $35 per hour, but the cash component cannot drop below $30. The Fair Work Commission’s national minimum wage is the absolute minimum cash wage, and salary packaging does not allow an employer to pay less.

Separating the legal minimum from other figures

It’s easy to confuse the legal minimum with survey averages or negotiated salaries. The Australian Bureau of Statistics (ABS) reported in May 2026 that full-time adult ordinary-time earnings averaged $2,083.70 per week, and all employees averaged $1,579.20 per week. These are much higher than the legal minimum. A salary-packaged role might have a total remuneration package above the average, but the cash base must still comply with the relevant award or the national minimum.

Award rates are set by the Fair Work Commission and vary by industry and classification. For non profit workers, the SCHADS Award is common. From the first full pay period on or after 1 July 2026, modern award minimum wages rise by 4.75%, but the lowest ongoing classification cannot fall below 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.

Negotiated salaries in enterprise agreements can be higher than award rates, but they cannot be lower. If you are award-free and agreement-free, the national minimum wage applies. Juniors, apprentices, trainees, and supported wage workers may receive less than the adult rate, as outlined in the Fair Work Ombudsman’s junior pay rates.

Super guarantee on top

Employers must pay super guarantee of 12% on top of your ordinary time earnings. This is calculated on your cash salary before salary sacrifice, not on the reduced packaged amount. So if you salary package part of your wage, your super contributions are still based on your original ordinary time earnings. This is an important distinction because salary packaging can affect your take-home pay but not your super guarantee base.

Practical considerations

If you are considering non profit salary packaging, check your award or agreement first. Some awards limit the types of benefits you can package or require employer consent. The Australian Taxation Office (ATO) sets the rules for fringe benefits tax (FBT), and non profit employers often have FBT exemptions or caps. But none of these change the minimum wage obligation.

For more guidance on which pay floor applies to you, see Which minimum wage applies. You can also explore our Guides for detailed explanations of awards, agreements, and salary packaging.

Summary

Non profit salary packaging is a valuable tax strategy, but it does not override the minimum wage. Your employer must pay you at least the national minimum wage or the applicable award rate in cash. Super is paid on your full ordinary time earnings before packaging. Always verify your classification and award coverage to ensure compliance.

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