Can salary packaging reduce my pay below the minimum wage?

No. The Fair Work Act requires that an employee's cash salary (or the total value of salary and benefits) must at least equal the applicable minimum wage. Salary packaging a novated lease reduces your taxable income but cannot bring your cash pay below the legal floor. The employer must still pay at least $26.44 per hour (or the relevant award rate) in cash or a combination of cash and benefits, with the cash component meeting the minimum.

Does salary packaging affect casual loading?

Casual loading is a separate entitlement. The casual loading (25% for most awards) is calculated on the base hourly rate before salary packaging. Salary packaging does not reduce the loading amount. The employer must pay the full casual rate, including loading, as cash. Packaging a novated lease only affects the tax treatment of your salary, not the minimum cash pay you must receive.

How is superannuation calculated on a packaged salary?

Superannuation guarantee contributions are calculated on an employee's ordinary time earnings (OTE). Salary packaging a novated lease generally reduces your reportable salary for tax purposes, but the ATO's definition of OTE for super includes most salary-sacrificed amounts. Your employer must pay super at 12% on the full OTE, including the salary-sacrificed component, unless the arrangement is specifically excluded. Always check your award or agreement and the ATO's guidelines.

Salary Packaging Novated Lease and the Minimum Wage: What You Need to Know

The national minimum wage is $26.44 per hour; salary packaging does not reduce the cash pay required to meet this floor.

What is salary packaging and a novated lease?

Salary packaging (also called salary sacrificing) is an arrangement where an employee agrees to forgo part of their cash salary in exchange for a non-cash benefit. A novated lease is a common benefit: the employee leases a car, and the lease payments are made from pre-tax salary. This reduces the employee's taxable income, potentially lowering their tax bill. However, the arrangement must still comply with workplace laws, including minimum wage obligations.

How salary packaging interacts with minimum wage

The legal minimum wage in Australia is set by the Fair Work Commission. From 1 July 2026, the adult national minimum wage is $26.44 per hour, $1,004.90 per week (38 hours). For casual employees, the minimum is $33.05 per hour (including 25% casual loading). These are cash minimums. Salary packaging cannot reduce the cash pay below these figures. The Fair Work Ombudsman explains that an employee must receive at least the minimum wage in cash or a combination of cash and benefits, but the cash component must be enough to meet the minimum if the benefit is not convertible to cash. In practice, most salary packaging arrangements leave the cash salary above the minimum, but if the packaged salary drops below, the employer must top up the cash.

Award rates, enterprise agreements, and salary packaging

Modern awards and enterprise agreements often set higher minimum rates than the national minimum. For example, a hospitality award might require $27.00 per hour. Salary packaging does not change that obligation. The award or agreement may also have specific rules about salary sacrificing. Some awards prohibit salary packaging that reduces the base rate of pay. Others allow it only above a certain threshold. Always check the applicable award or agreement. If you are award-free and agreement-free, the national minimum applies. But remember: junior rates, apprentice rates, and supported wages can be lower than the adult minimum. Salary packaging for those employees must still respect the relevant lower floor.

Superannuation and salary packaging

Employers must pay superannuation guarantee contributions of 12% on top of ordinary time earnings. Salary packaging a novated lease typically reduces your taxable salary, but the ATO includes most salary-sacrificed amounts in OTE for super purposes. This means your employer should calculate super on the full salary before the sacrifice, unless the benefit is specifically excluded (e.g., some car parking). If your employer calculates super on the reduced cash salary, you may be underpaid super. The Fair Work Ombudsman and ATO provide guidance. Always confirm your super is calculated correctly.

Comparing your packaged salary to the legal floor

To check if your packaged salary meets the minimum, add your cash salary plus the value of the novated lease (the benefit). Compare that total to the applicable minimum wage (hourly or weekly). The cash component alone must be at least the minimum if the benefit cannot be converted to cash. The ABS May 2026 survey shows average full-time adult ordinary-time earnings of $2,083.70 per week, but that is a market average, not a legal floor. Your negotiated salary may be higher or lower. The legal floor is the minimum you must receive. For more details on which minimum applies to you, see Which minimum wage applies or browse our Guides.

Important notes

This site provides orientation only. It is not a pay determination, tax advice, or legal advice. Salary packaging rules can be complex. Consult the ATO, the Fair Work Ombudsman, or a qualified professional for your situation. The national minimum wage rates and award rates are set by the Fair Work Commission and enforced by the Fair Work Ombudsman. Modern awards and enterprise agreements can require higher rates. Always check your specific circumstances.

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