Salary packaging under awards and the national minimum wage

What is salary packaging?

Salary packaging (also called salary sacrificing) is an arrangement where you agree to receive part of your remuneration as non-cash benefits instead of cash salary. Common benefits include cars, laptops, additional superannuation contributions, or gym memberships. The idea is that the benefit is often taxed less than the equivalent cash salary, increasing your overall take-home value.

Salary packaging is not a wage itself; it is a way to structure your pay. Your gross salary (the amount before packaging) is what the Salary Index measures. The index compares your full-time adult ordinary-time earnings to the national line of 100, which equals $108,352 per year (based on ABS Average Weekly Earnings, May 2026). Salary packaging does not change that gross figure, so your index remains the same as your base pay.

Awards and the national minimum wage

Australia has a system of modern awards that set minimum wages and conditions for specific industries and occupations. The national minimum wage is the fallback for employees not covered by an award. From 1 July 2026, the national minimum wage is $26.44 per hour, or $1,004.90 per week, annualised to $52,255 (index 48.2). Award minima rose by 4.75% from the same date, with an entry-level award floor of $25.74 per hour.

When you salary package, your employer must still pay you at least the minimum cash wage required by your award or the national minimum wage. You cannot package away the minimum. For example, if you are on the Retail Award (index 75.9), your minimum hourly rate might be higher than the national minimum wage. Your cash salary after packaging must stay at or above that rate.

How salary packaging fits in

Salary packaging is most common for employees earning above the minimum, because it only applies to the portion of salary above the award or minimum wage floor. If you earn $80,000 per year (index 73.8), you could package a car or extra super contributions from the amount above the minimum. But if you earn exactly the award minimum, there is no room to package without breaching the minimum cash requirement.

Some awards or enterprise agreements may have specific clauses about salary packaging. For instance, they might limit the types of benefits or require employer consent. Always check your pay guides for award-specific rules.

Tax and super considerations

Salary packaging can reduce your taxable income. For the 2026–27 income year, the tax rates (excluding Medicare) are: nil up to $18,200; 15% from $18,201 to $45,000; 30% from $45,001 to $135,000; 37% from $135,001 to $190,000; and 45% above $190,000. Plus a 2% Medicare levy. By packaging benefits, you lower your assessable income, potentially moving you into a lower tax bracket.

Superannuation salary sacrifice is a common form of packaging. You can contribute extra to your super fund, which is taxed at only 15% (up to the concessional cap) instead of your marginal rate. The super guarantee is 12% from 1 July 2026, and it applies to your ordinary time earnings, which includes salary sacrificed amounts. However, your employer can count your salary sacrifice contributions towards meeting the super guarantee obligation. This is a key interaction with awards: your award might specify how super is calculated.

Example: Packaging a car

Suppose you earn $90,000 per year (index 83.0) under the Professional, Scientific and Technical Services Award (index 114.7 for the industry, but your personal index is based on your actual earnings). You decide to salary package a car worth $15,000 per year in lease payments. Your cash salary reduces to $75,000, but your employer still pays the super guarantee on your original $90,000 (OTE). The car benefit may be subject to Fringe Benefits Tax (FBT), but many employers use a novated lease to make it tax-effective. Your take-home pay after tax and packaging could be higher than if you received the full $90,000 in cash, depending on your tax bracket.

State and industry variations

The Salary Index varies by state and industry. For example, the ACT has an index of 109.9 ($119,090 annualised), while Tasmania is 88.6 ($96,008). If you work in a high-index state like Western Australia (106.9, $115,825), you may have more room to salary package. Similarly, industries like Mining (index 154.7) often have higher pay, making packaging more attractive. Check states and industries for benchmarks.

Key points to remember

• Salary packaging does not change your gross ordinary-time earnings or your Salary Index.
• You cannot package below the award minimum or national minimum wage.
• Super salary sacrifice can boost retirement savings and reduce tax.
• Always check your award or agreement for specific rules on salary packaging.
• The tax benefits depend on your marginal tax rate and the type of benefit.

For more details on how the index is calculated, see how the index works. For other topics related to pay and conditions, visit topics.