Salary Packaging and the Australian Minimum Wage: How It Affects Your Pay Floor

Salary Packaging and the Minimum Wage: What Changes and What Doesn't

Salary packaging is a common way to structure your pay, especially in the not-for-profit, healthcare, and public sectors. It allows you to swap part of your cash salary for benefits like a car, laptop, or additional super contributions. But one thing salary packaging does not change is the minimum wage floor that applies to you. This guide explains how salary packaging interacts with Australia's pay floors, what the legal minimum is, and what you should watch out for.

The Legal Minimum Wage Floor

The Fair Work Commission sets the national minimum wage. 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%, 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 in the national system, but some state public sector and local government employees may be covered by state awards. A modern award or enterprise agreement can require a higher rate than the national minimum.

Salary packaging does not reduce your employer's obligation to pay at least the applicable minimum. The Fair Work Ombudsman explains that salary sacrifice arrangements cannot bring your total remuneration below the legal minimum. If you earn an award rate, the cash component must still meet the award's minimum hourly rate. For example, the lowest ongoing award classification from 1 July 2026 is $26.44 per hour, and an introductory rate for the first six months is $25.74 per hour.

How Salary Packaging Affects Your Pay Calculation

When you salary package, your employer pays for the benefit (e.g., a car lease) from your pre-tax salary. Your cash pay decreases, but your total remuneration (cash plus benefits) should remain the same or be higher. However, the minimum wage is a cash or equivalent floor. If your salary packaging reduces your cash pay below the minimum, the arrangement is not lawful. The employer must ensure that after the sacrifice, you still receive at least the minimum wage in cash or a combination that meets the legal test.

Super guarantee is calculated on your ordinary time earnings, which include the salary before sacrifice. Your employer must pay 12% super on top of that amount. Salary packaging into super does not reduce the employer's super obligation; in fact, it may increase your super balance. The ATO sets the rules for salary sacrifice and super.

Award and Agreement Rates vs. Salary Packaging

If you are covered by a modern award, your minimum pay is set by that award. Salary packaging cannot undercut the award rate. The Fair Work Commission's 2026 decision increased award minimums 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. An enterprise agreement may set higher rates. Salary packaging is a separate arrangement and does not change the award or agreement minimum.

For award-free employees, the national minimum applies. Juniors, apprentices, and trainees have different rates. For example, an award-free 18-year-old earns $18.06 per hour (68.3% of the adult rate). Salary packaging cannot reduce that rate below the junior minimum.

What the Reference Shows

The on-site reference provides the national minimum wage figures, award backstop rates, junior percentages, and ABS average earnings. It does not contain a specific figure for salary packaging because salary packaging is a method of pay delivery, not a pay floor. The legal floor is clear: $26.44 per hour or $1,004.90 per week from 1 July 2026. The ABS May 2026 data shows full-time adult ordinary-time earnings of $2,083.70 per week, which is much higher than the minimum. Salary packaging is common for employees earning above the minimum, but it does not change the minimum obligation.

Key Takeaways

• Salary packaging does not reduce the minimum wage you must be paid.
• The national minimum wage is $26.44 per hour or $1,004.90 per week from 1 July 2026.
• Super guarantee of 12% is paid on ordinary time earnings before salary sacrifice.
• Award and agreement rates can be higher than the national minimum.
• If you are unsure which pay floor applies, check your award or agreement. For award-free employees, the national minimum applies.

For more information, see Which minimum wage applies and Guides.

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