What is salary sacrifice super and how does it affect your minimum wage?

What is salary sacrifice super and how does it relate to your pay?

Salary sacrifice super is an arrangement where you and your employer agree to divert part of your before-tax salary or wages into your superannuation fund instead of paying it to you as cash. The Australian Taxation Office explains that this reduces your taxable income because the sacrificed amount is not subject to pay-as-you-go (PAYG) withholding tax. Instead, it is taxed inside the super fund at the concessional rate of 15%, which is generally lower than your marginal tax rate.

For most employees, the key question is how salary sacrifice interacts with the minimum wage. The Fair Work Ombudsman states that the national minimum wage is the gross amount before tax is taken out. Salary sacrifice is a voluntary post-tax (or rather pre-tax) arrangement that does not change the minimum cash wage you must receive. If you are covered by a modern award or enterprise agreement, the minimum pay rates in that instrument still apply, and salary sacrifice cannot reduce your cash pay below those rates.

The legal minimum wage floor

From 1 July 2026, the national minimum wage for award-free employees is $26.44 per hour or $1,004.90 per week. For casual employees, the casual loading brings the rate to $33.05 per hour. These figures are before tax and before any salary sacrifice. If you are covered by a modern award, the award rate may be higher, and you must be paid at least that amount in cash. Some awards have introductory rates (e.g., $25.74 per hour for the first six months) that are still above the national minimum but below the full classification rate.

Importantly, salary sacrifice super contributions do not count towards satisfying the minimum wage obligation. Your employer must still pay you the full cash wage required by law. The sacrificed amount is an additional contribution to your super, not a substitute for wages.

How super guarantee works with salary sacrifice

The super guarantee requires your employer to contribute 12% of your ordinary time earnings (OTE) into your super fund. The ATO’s list of payments that are OTE includes ordinary hours, casual loading, shift penalties, and commissions. Overtime payments are generally not OTE. When you have a salary sacrifice arrangement, the ATO clarifies that the sacrificed amount is still considered OTE for super guarantee purposes. That means your employer must calculate the 12% on your full OTE as if the sacrifice had not happened. The salary sacrifice contributions are then made on top of the compulsory super guarantee.

For example, if your ordinary time earnings are $1,000 per week, your employer must pay $120 into super (the 12% guarantee). If you also salary sacrifice $50 per week into super, your employer pays a total of $170 into your super fund. The $50 sacrifice reduces your taxable income but does not reduce the super guarantee obligation.

Award rates and enterprise agreements

If you are covered by a modern award or an enterprise agreement, the minimum pay rates in that instrument set the floor. Some awards have specific clauses about salary sacrifice or total remuneration packaging. You should check your award or agreement to see if any restrictions apply. The Fair Work Ombudsman’s Pay and Conditions Tool can help you find the correct minimum rates for your award. For more guidance, see our Guides on understanding pay slips and super.

Comparing salary sacrifice with other pay concepts

It is important to separate the legal minimum from other figures. The national minimum wage is a floor set by the Fair Work Commission. Award rates are higher in many industries. Enterprise agreements can set rates above the award. Salary sacrifice is a voluntary arrangement that affects your take-home pay and super, but it does not change the minimum cash wage you are entitled to.

The Australian Bureau of Statistics reports that full-time adult average weekly ordinary time earnings were $2,083.70 in May 2026. That is a survey average, not a legal requirement. Your actual pay may be higher or lower depending on your job and agreement.

Practical check with your hourly rate

To see how salary sacrifice affects your situation, start with your hourly rate. If you are award-free and over 21, your minimum is $26.44 per hour. If you are covered by an award, use the award classification rate. Then consider any salary sacrifice arrangement: the cash you receive must still meet that minimum. Your super guarantee is calculated on your OTE, which includes your ordinary hours and certain allowances. Salary sacrifice super contributions are additional and do not reduce the super guarantee.

For more details on which minimum wage applies to you, visit our Which minimum wage applies page. You can also explore Rate tables for current award and junior rates.

Key takeaways

• Salary sacrifice super is a voluntary pre-tax contribution to your super fund.
• It does not reduce the minimum cash wage you must receive.
• Your employer must still pay the full 12% super guarantee on your ordinary time earnings.
• The sacrificed amount is taxed at 15% in the super fund and counts towards your concessional contributions cap.
• Always check your award or agreement for any specific rules on salary packaging.

If you are unsure about your entitlements, consult the Fair Work Ombudsman or the Australian Taxation Office for authoritative guidance.