Does salary packaging a car reduce my minimum wage entitlement?

No. Salary packaging is an arrangement between you and your employer to sacrifice part of your pre-tax salary for a car benefit. It does not change the minimum wage or award rate you must receive. Your ordinary time earnings must still meet the legal minimum, but the packaged amount is deducted from your gross pay before tax, affecting your net pay.

Can my employer include a salary packaged car as part of meeting the minimum wage?

Generally, salary packaging cannot be used to reduce your cash pay below the minimum wage. The Fair Work Ombudsman states that an employee must still receive at least the minimum wage in money (or money plus certain non-cash benefits if allowed by award). However, for award-covered employees, the rules vary; some awards allow salary sacrifice arrangements as long as the base rate is not reduced below the award minimum.

How does superannuation apply to salary packaging a car?

Superannuation guarantee contributions are calculated on your ordinary time earnings (OTE). Salary packaging reduces your OTE for super purposes if the packaged amount is a genuine sacrifice of salary. However, the ATO has specific rules: if you salary package a car via a novated lease, the employer's super contribution is based on your salary after the sacrifice. This can lower your super contributions. The super guarantee rate is 12% on top of OTE.

Salary Packaging Car and the Minimum Wage: Understanding Your Pay Floor

Salary packaging a car does not affect the legal minimum wage; the national minimum wage of $26.44 per hour (from 1 July 2026) remains the floor for award-free employees, but salary packaging can reduce taxable income.

Salary Packaging Car and the Minimum Wage

If you are considering salary packaging a car, you might wonder how it affects your pay floor. Salary packaging (also called salary sacrificing) allows you to use pre-tax income to pay for a vehicle lease, reducing your taxable income. However, this arrangement does not change the legal minimum wage you are entitled to receive. This guide explains how the national minimum wage, award rates, and enterprise agreements interact with salary packaging, and what you need to know to ensure you are paid correctly.

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 national-system employees who are not covered by a modern award or enterprise agreement. If you are award-free, your employer must pay you at least these amounts in cash or a combination of cash and allowable non-cash benefits. Salary packaging a car is a non-cash benefit, but it cannot bring your total remuneration below the minimum wage. The Fair Work Ombudsman explains that salary sacrifice arrangements must not reduce an employee's base rate of pay below the relevant minimum.

Award Coverage and Salary Packaging

Most Australian employees are covered by a modern award. Awards set minimum wages for specific industries and occupations, and these are generally higher than the national minimum. For example, 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 sit under the national minimum of $26.44 per hour. An introductory rate (first six months) cannot sit under $25.74 per hour. If you are award-covered, your employer must pay at least the award rate. Salary packaging a car is often permitted under awards, but the award may specify that the base rate of pay (the cash component) cannot be reduced below the award minimum. Some awards allow salary sacrifice for cars, but the arrangement must be voluntary and documented.

Enterprise Agreements and Negotiated Salaries

If you are covered by an enterprise agreement, the agreement sets your minimum pay and conditions. Enterprise agreements can include salary packaging provisions, but they cannot undercut the National Employment Standards or the relevant award (if any). A negotiated salary that includes a salary packaged car must still meet the legal floor. The ABS May 2026 data shows full-time adult ordinary-time earnings of $2,083.70 per week, which is well above the minimum. However, that average includes many higher-paid roles. Your individual salary may be negotiated, but the minimum wage is the baseline.

Superannuation on Top

Remember that superannuation guarantee contributions are paid by your employer on top of your ordinary time earnings. From 1 July 2026, the super guarantee rate is 12%. If you salary package a car, your ordinary time earnings for super purposes may be reduced because the sacrificed amount is not counted as OTE. This can lower the super your employer must pay. The ATO has specific rules for novated leases and salary sacrifice. Always check with a tax professional.

Award-Free Juniors and Apprentices

If you are under 21 and award-free, junior percentage rates apply. For example, a 17-year-old award-free employee earns $15.29 per hour (57.8% of adult rate) or $19.11 casual. Salary packaging a car is less common for juniors, but the same principle applies: the cash pay must meet the junior minimum. Apprentices and trainees follow the Miscellaneous Award rates.

Key Takeaways

Salary packaging a car does not change the minimum wage you must receive.
The national minimum wage is $26.44/h from 1 July 2026.
Award and agreement rates can be higher.
Super is paid on top at 12%.
For precise figures, see Which minimum wage applies and Rate tables.

This site provides orientation only. It is not a pay determination or tax advice. Always consult the Fair Work Ombudsman for your specific situation.

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