What is salary packaging Australia? How it relates to the minimum wage

What is salary packaging Australia?

Salary packaging (also called salary sacrifice) is an arrangement where you agree with your employer to receive part of your before-tax salary as non-cash benefits instead of cash. Common packaged items include cars, laptops, parking, childcare, and additional superannuation. The key advantage is that the packaged amount is not subject to income tax, reducing your taxable income. However, salary packaging does not change the legal minimum wage that applies to your ordinary hours of work.

The legal minimum wage floor

From 1 July 2026, the national minimum wage is $26.44 per hour, or $1,004.90 per week for a 38‑hour week (casual rate $33.05 per hour). This is the minimum an employer must pay you for ordinary time work, before any salary packaging deductions. The Fair Work Commission sets this rate, and the Fair Work Ombudsman explains and enforces it. If you are covered by a modern award or enterprise agreement, your minimum rate may be higher than the national minimum. Salary packaging cannot bring your effective hourly rate below the applicable minimum.

Separating the minimum from other figures

• Legal minimum: $26.44/h (adult, award‑free). Juniors, apprentices, and trainees may receive less under specific rules.
• Award rate: Many awards have higher minimum classifications. For example, the introductory rate for the first six months is $25.74/h, but ongoing rates must be at least $26.44/h.
• Survey average: The ABS May 2026 survey reports full‑time adult ordinary‑time earnings of $2,083.70 per week. This is an average, not a minimum, and includes salary‑packaged amounts.
• Negotiated salary: Your actual pay may be above the minimum, and salary packaging can be part of that negotiation.

Super guarantee on top

Your employer must pay superannuation guarantee contributions of 12% on your ordinary time earnings. This is on top of your base salary, not deducted from it. Salary packaging for additional super can count towards the 12% only if it is above the minimum. The super guarantee is calculated on your ordinary time earnings before any salary sacrifice, unless the sacrifice is for super.

Practical check with your hourly rate

To see if your pay meets the minimum, compare your gross cash hourly rate (before tax and before any salary packaging) to $26.44. If you are paid a salary, divide your annual cash salary by 52 weeks and then by 38 hours. If that figure is below $26.44, your employer may be underpaying you, regardless of any packaging benefits. Remember that award or agreement rates can be higher. For more details, see Which minimum wage applies and Rate tables.

Important notes

• Salary packaging does not reduce your minimum wage entitlement. The packaged benefit is a use of your before‑tax pay, not a reduction in the hourly rate.
• The national minimum wage applies to national‑system employees who are award‑free and agreement‑free. Most private‑sector employees are in the national system. State public sector and some local government employees may be covered by state awards.
• This site provides orientation only, not legal or tax advice. Consult the ATO for salary packaging rules and the Fair Work Ombudsman for pay entitlements.

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