Can salary packaging reduce my pay below the minimum wage?

No. The Fair Work Act requires that your base rate of pay (before any salary sacrifice) must be at least the national minimum wage or the applicable award rate. Salary packaging can only reduce the cash amount you receive, not the base rate. Your employer must still pay you at least $26.44 per hour (or $1,004.90 per week) in cash or a combination of cash and benefits that meets the minimum.

How does salary packaging affect my super guarantee?

Super guarantee (currently 12% of ordinary time earnings) is calculated on your ordinary time earnings, which generally includes amounts you salary sacrifice. If you sacrifice part of your salary into super, that amount is still counted as earnings for super guarantee purposes, so your employer must pay 12% on top of the sacrificed amount. Salary packaging into super can boost your retirement savings, but it does not reduce the employer's super obligation.

Is salary packaging the same as salary sacrifice?

Yes, in Australia the terms are used interchangeably. Both refer to an arrangement where you agree to forgo part of your salary in exchange for non-cash benefits such as a car, laptop, or additional super contributions. The benefits are usually provided before income tax is deducted, which can reduce your taxable income. However, the arrangement must comply with tax laws and cannot reduce your base pay below the legal minimum.

What Does Salary Packaging Mean? Understanding Your Pay Floor and Tax Benefits

Salary packaging lets you swap part of your salary for benefits, but your base pay cannot fall below the national minimum wage of $26.44 per hour or $1,004.90 per week from 1 July 2026.

What Does Salary Packaging Mean?

Salary packaging (also called salary sacrifice) is a way to structure your pay so that you receive some of it as non-cash benefits instead of cash. Common benefits include a car, laptop, additional super contributions, or even school fees. The key idea is that the benefits are provided before income tax is deducted, which can lower your taxable income and increase your take-home value. But salary packaging does not change the legal minimum wage that applies to you.

The Legal Minimum Wage Floor

Every Australian employee covered by the national system must receive at least the national minimum wage. From 1 July 2026, that rate is $26.44 per hour or $1,004.90 per week for a full-time adult worker. Casual employees get a loading of 25%, making the casual minimum $33.05 per hour. These rates are set by the Fair Work Commission and enforced by the Fair Work Ombudsman. If you are covered by a modern award or enterprise agreement, your minimum rate may be higher. Salary packaging cannot reduce your base rate of pay below this floor. Your employer must ensure that your total remuneration (cash plus benefits) meets or exceeds the minimum.

How Salary Packaging Compares with Other Pay Concepts

It is important to separate the legal minimum from other pay benchmarks:

Legal minimum: The national minimum wage or award rate. This is the absolute floor.
Survey average: According to the ABS (May 2026), full-time adult ordinary-time earnings average $2,083.70 per week. This is a market statistic, not a legal requirement.
Award rate: Many industries have modern awards that set higher minimum rates than the national minimum. For example, an introductory rate under an award may be $25.74 per hour for the first six months.
Negotiated salary: Your actual pay may be above the minimum, based on your skills, experience, and bargaining power. Salary packaging is a way to customise how that negotiated salary is delivered.

Super Guarantee on Top

Remember that super guarantee is an employer payment on top of your ordinary time earnings. From 1 July 2026, the super guarantee rate is 12%. This means if your base salary is $1,004.90 per week, your employer must also pay $120.59 into your super fund. Salary packaging into super can increase your super contributions, but the employer's 12% obligation is calculated on your ordinary time earnings, which includes any sacrificed amount. So salary packaging does not reduce the super your employer must pay.

Tax and Medicare Considerations

Salary packaging reduces your taxable income because the benefits are provided before tax. However, you still pay Medicare levy (2% once your annualised ordinary gross income exceeds $30,000) and income tax at the resident rates with the full tax-free threshold. The ATO applies a low-income tax offset that shades in, but salary sacrifice can affect that. This site does not provide tax advice; consult a tax professional for your situation.

Award-Free and Agreement-Free Employees

If you are not covered by a modern award or enterprise agreement, the national minimum wage applies. Junior employees (under 21) have percentage-based minimums. For example, a 16-year-old award-free junior must receive at least $12.51 per hour (or $15.64 casual). Salary packaging cannot reduce these rates either. Apprentices and trainees have their own rates under the Miscellaneous Award.

Internal Resources

For more detail on which pay floor applies to you, see Which minimum wage applies and Rate tables. You can also explore Guides for further explanations.

Summary

Salary packaging is a flexible way to receive part of your pay as benefits, potentially saving tax. But it does not change the fundamental requirement that your base pay must meet the national minimum wage or applicable award rate. Always check your award or agreement, and remember that super is paid on top of your ordinary time earnings. If you are unsure about your entitlements, contact the Fair Work Ombudsman or a qualified advisor.