Can my employer pay me less than the minimum wage if I have a salary packaging vehicle?

No. Salary packaging is a voluntary arrangement that reduces your taxable income, but your employer must still pay you at least the applicable minimum wage (national minimum, award, or enterprise agreement rate) before any salary sacrifice deductions.

How does salary packaging affect my super guarantee?

The super guarantee of 12% is calculated on your ordinary time earnings, which is generally your base salary or wage before salary sacrifice. Your employer must pay super on top of that amount, not on the reduced salary after packaging.

Does salary packaging affect my award or agreement entitlements?

Salary packaging can change your taxable income but does not alter your minimum hourly or weekly rate under a modern award or enterprise agreement. Your award or agreement may have specific rules about salary sacrifice; check with the Fair Work Ombudsman or your employer.

Salary Packaging Vehicle: How It Affects Your Minimum Wage and Take-Home Pay

The national minimum wage from 1 July 2026 is $26.44 per hour or $1,004.90 per week, before any salary packaging arrangement.

Understanding Salary Packaging Vehicle Arrangements

A salary packaging vehicle (often called a novated lease or car salary sacrifice) lets you use pre-tax income to pay for a car and its running costs. While this can reduce your taxable income, it does not change the minimum pay your employer must give you. This guide explains how the legal pay floor, super, tax, and Medicare interact with a salary packaging vehicle.

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 week. Casual employees receive a 25% loading, making the casual rate $33.05 per hour. These rates apply to national-system employees who are not covered by a modern award or enterprise agreement.

Award and Agreement Rates

If you work under a modern award, your minimum wage is likely higher than the national minimum. 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. Some awards have introductory rates (first 6 months) at $25.74 per hour or $978.10 per week. An enterprise agreement can also set a higher rate. Your salary packaging vehicle does not reduce these minimums.

Junior, Apprentice, and Supported Wages

Not every worker receives the adult rate. Award-free juniors have percentage-based minimums: under 16 get $9.73 per hour, 16-year-olds $12.51, 17-year-olds $15.29, 18-year-olds $18.06, 19-year-olds $21.82, 20-year-olds $25.84, and 21+ the full $26.44. Apprentices and trainees follow the Miscellaneous Award. Supported wages for employees with disability may also be lower. Salary packaging cannot bring your pay below these legal floors.

Super Guarantee: An Employer Payment on Top

The super guarantee requires your employer to pay 12% of your ordinary time earnings into a super fund. This is on top of your wage or salary. If you have a salary packaging vehicle, your ordinary time earnings are generally your base salary before the sacrifice. So your employer must still pay super on that higher amount. For example, if your base salary is $55,000 and you salary sacrifice $10,000 for a car, your employer pays super on $55,000, not $45,000. This protects your retirement savings.

Tax, Medicare, and the Weekly Packet

Your take-home pay after tax and Medicare depends on your taxable income. Salary packaging reduces your taxable income, which can lower your tax and Medicare levy. For the 2026-27 tax year, resident rates with the full tax-free threshold apply. Medicare is estimated at 2% once your annualised ordinary gross income reaches $30,000. The low-income reduction uses ATO shade-in thresholds. This model leaves out the low income tax offset, HELP repayments, and the Medicare levy surcharge.

Example: Minimum Wage and Salary Packaging

If you earn the national minimum wage of $1,004.90 per week ($52,254.80 annually), your taxable income after salary packaging could be lower. But your employer must still pay you at least $1,004.90 in cash or benefits before any sacrifice. The salary packaging vehicle is a voluntary deduction from your gross pay, not a reduction in your minimum entitlement.

Separating the Legal Minimum from Other Figures

It is important to distinguish the legal minimum from survey averages and negotiated salaries.

Survey Average Earnings

The Australian Bureau of Statistics (ABS) reported in May 2026 that full-time adult ordinary-time earnings averaged $2,083.70 per week. All employees averaged $1,579.20 per week. These are market averages, not legal floors. Your salary packaging vehicle does not change these benchmarks.

Award Rates vs Negotiated Salaries

A modern award sets minimum pay and conditions for a specific industry or occupation. Many employees earn above the award rate through negotiation or enterprise agreements. Salary packaging is often part of a total remuneration package, but the award minimum must still be met in cash or equivalent benefits.

How the Figures Work

For more detail on how minimum wage rates are calculated and applied, see How the figures work. If you are unsure which pay floor applies to you, visit Which minimum wage applies for guidance.

Final Notes

This guide is for orientation only. It is not a pay determination, tax advice, or legal advice. The adult weekly national minimum is the published $1,004.90 figure. Multiplying $26.44 by 38 lands 18 cents lower because of rounding in the order. Casual weekly figures on this site are the published casual hourly rate times 38 ordinary hours, with no penalty rates.

For rate tables and more, see Rate tables.