Salary Packing and the Australian Minimum Wage: What You Need to Know

Salary Packing and the Minimum Wage: Understanding Your Pay Floor

Salary packing—also called salary sacrifice—is a common arrangement where you agree to forgo part of your cash salary in exchange for benefits such as a car, laptop, or additional super contributions. While this can reduce your taxable income, it does not change the fundamental obligation that your pay must meet Australia’s minimum wage laws. Whether you are award-free, covered by a modern award, or working under an enterprise agreement, the cash component of your pay after salary packing cannot fall below the legal floor.

The Legal Minimum Wage Floor

The Fair Work Commission sets the national minimum wage. From the first full pay period on or after 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 loading of at least 25%, bringing the casual minimum to $33.05 per hour. These figures apply to national‑system employees who are award‑free and agreement‑free. The Fair Work Ombudsman explains and enforces these rates.

Importantly, the national minimum is a backstop. A modern award or enterprise agreement can require a higher rate. For example, award minimum wages rise by 4.75% from 1 July 2026, but the lowest ongoing classification cannot sit under the national minimum. Introductory rates (first six months) are capped at $25.74 per hour or $978.10 per week. Junior, apprentice, trainee, and supported wage employees may receive lower rates as set out in the reference.

Salary Packing and Award Rates

If a modern award covers your role, your base rate of pay under that award is the minimum you must receive in cash. Salary packing cannot reduce that base rate. For instance, if your award sets a rate of $28.00 per hour, your cash pay after any sacrifice must be at least $28.00. The same principle applies to enterprise agreements—the agreement rate is the floor.

Salary Packing and Superannuation

Employers must pay the super guarantee of 12% on top of your ordinary time earnings. When you salary sacrifice into super, those sacrificed amounts are generally still part of ordinary time earnings, so your employer must pay super on them. However, if you sacrifice salary for a non‑super benefit (e.g., a car), your ordinary time earnings may reduce, and the super guarantee base could shrink. The ATO provides detailed guidance on what counts as ordinary time earnings. Always check that your total remuneration package, including super, complies with the law.

Casual Loading and Salary Packing

Casual employees receive a loading to compensate for not receiving paid leave. The loading is a percentage of the base rate. If you salary package a portion of your base rate, the loading is calculated on that reduced base. Your total cash pay—base plus loading—must still equal or exceed the casual minimum. From 1 July 2026, that minimum is $33.05 per hour. If your base rate after sacrifice drops too low, the loading will also fall, potentially breaching the floor. Ensure your arrangement is structured so that the combined cash amount meets the applicable casual rate.

Age‑Based Rates and Salary Packing

Award‑free employees who are under 21 and not covered by an award or agreement follow junior percentage rates. For example, a 16‑year‑old must receive at least $12.51 per hour (or $15.50 per hour casual). Salary packing cannot reduce cash pay below that junior minimum. The same applies to all age brackets. The Fair Work Ombudsman’s reference table shows the full list from 1 July 2026.

Negotiated Salaries and Enterprise Agreements

If you have a negotiated salary above the minimum, salary packing can apply to the excess. However, the base rate under any applicable award or agreement remains the legal floor. You cannot sacrifice your way below that floor. Enterprise agreements often include specific clauses about salary sacrifice; those clauses must not undercut the agreement’s minimum rates.

How Does Salary Packing Affect Your Take‑Home Pay?

Salary packing reduces your taxable income, which can lower your tax bill. But it may also affect entitlements such as leave loading, overtime, and penalty rates if those are calculated on your base rate. Always read your employment contract and any salary sacrifice agreement carefully. The Australian Taxation Office sets the rules for fringe benefits tax and reportable fringe benefits amounts.

Key Takeaways

• The national minimum wage is $26.44 per hour from 1 July 2026. Casual employees get $33.05 per hour.
• Salary packing must not reduce your cash pay below the relevant minimum wage, award rate, or enterprise agreement rate.
• Super guarantee of 12% is paid on ordinary time earnings; salary sacrifice into super generally preserves that base.
• Junior, apprentice, and supported wage employees have lower floors that still apply after salary packing.
• For more on which minimum wage applies to you, see Which minimum wage applies and our Guides section.

This article is for orientation only. It is not a pay determination, tax advice, or legal advice. Consult the Fair Work Ombudsman or a qualified professional for your specific situation.

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