Salary packaging government employees: how awards and the national minimum wage set the floor

What is salary packaging for government employees?

Salary packaging, also called salary sacrifice, lets government employees swap part of their pre-tax salary for benefits like a car, laptop, or extra super contributions. Because government employers are often large and stable, they commonly offer packaging arrangements. The key point: packaging reduces your taxable income, which can lower the tax you pay. But it does not change the minimum pay you must receive under an award or the national minimum wage.

How awards and the national minimum wage set the floor

The national minimum wage from 1 July 2026 is $26.44 per hour, or $1,004.90 per week, annualised to $52,255. That gives a Salary Index of 48.2 – meaning it is less than half of the full-time adult ordinary-time earnings benchmark of $108,352 (index 100). Modern awards set higher minimums for specific industries and roles. For example, the Professional Employees Award 2020 might require a Level 1 employee to be paid $30 per hour. Award minima rose by 4.75% from 1 July 2026.

For government employees, many are covered by enterprise agreements or the Public Service Award. These agreements often set rates above the award minimum. But no matter what, your cash pay – the amount you actually receive in your bank account before any packaging – cannot fall below the award rate. Salary packaging only applies to the portion of your salary above that minimum.

Where do government employees sit on the Salary Index?

There is no single index figure for “government employees” because roles vary from administrative officers to engineers and policy advisors. However, we can look at state indices as a clue. The Australian Capital Territory has an index of 109.9 (annualised $119,090), the highest of any state, and that reflects a large public sector workforce. New South Wales sits at 101.2, Victoria at 98, and Western Australia at 106.9. These state averages include all industries, but they suggest that government employees in the ACT, for instance, typically earn above the national line. For a more precise picture, you would need to look at specific awards or enterprise agreements. The Salary Index uses the ABS Average Weekly Earnings benchmark, so comparing your gross annual salary to $108,352 gives your personal index.

Salary packaging and tax: a practical example

Consider a government employee earning $108,352 (index 100). Under the 2026–27 resident tax rates, they pay:

• Nil on the first $18,200
• 15% on the next $26,800 (to $45,000)
• 30% on the next $90,000 (to $135,000)
• Plus 2% Medicare levy

If they salary package a car worth $15,000 per year, their taxable income drops to $93,352. That saves tax at the 30% marginal rate (plus Medicare), so the net benefit is around $4,800. However, fringe benefits tax (FBT) may apply. Government employers often have FBT exemptions or concessions, especially for public benevolent institutions or certain benefits like super. Always check your employer’s packaging policy.

The role of super guarantee

From 1 July 2026, the super guarantee is 12% on ordinary time earnings, up to a maximum contribution base of $270,830. Salary packaging into super is common for government employees. The ATO treats salary-sacrificed super contributions as part of ordinary time earnings for SG purposes, so your employer must still pay 12% on your pre-sacrifice salary. That means packaging into super does not reduce your super guarantee – it can actually boost your total super if you also make additional voluntary contributions.

Why the award floor matters for packaging

If you are on an award, your base rate of pay is the minimum cash amount you must receive. Salary packaging cannot reduce that base rate. For example, if your award says you must be paid $30 per hour, your employer must pay you at least $30 per hour in cash, even if you also receive a packaged benefit. Packaging only affects amounts above that. So if you earn $35 per hour, you could package the extra $5 per hour. This is a critical protection: the award floor ensures you always have a minimum cash income.

Comparing across states and industries

Government employees in different states may have different pay levels. The states page shows that the ACT leads at 109.9, while Tasmania is lowest at 88.6. If you work for the federal government, your pay may follow a national agreement, but your location can still affect your index through cost-of-living allowances. Similarly, the industries page shows that mining (154.7) and professional services (114.7) are high, while retail (75.9) and accommodation (72.5) are low. Government roles often fall into education (105.5) or health care (97.8), depending on the agency.

How the index works for your pay

The how the index works page explains that your personal index is your yearly gross salary divided by $108,352, times 100. So if you earn $120,000, your index is about 110.8. That tells you how you compare to the national line. Salary packaging does not change your gross salary for index purposes – the index uses your gross pay before packaging. But packaging affects your take-home pay, which is what you actually spend.

Final thoughts on salary packaging government employees

Salary packaging is a valuable tool for government employees, but it must operate within the award and minimum wage framework. Your award rate is your safety net; packaging cannot push you below it. By understanding where your pay sits on the index and how packaging interacts with tax and super, you can make informed decisions. For more detail on award rates, see the pay guides section. Always consult your employer’s salary packaging policy and, if needed, a financial adviser.

FAQs

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