How much can you salary sacrifice? Awards and the national minimum wage set the floor

How much can you salary sacrifice? Awards and the national minimum wage set the floor

Understanding the keyword

"How much can you salary sacrifice" refers to an arrangement where you agree to forgo part of your salary in exchange for benefits such as super, cars, or other benefits. This reduces your taxable income. The key question is how much can you sacrifice? The answer depends on your award or agreement, but the most important limit is the national minimum wage or award rate you cannot sacrifice below.

Awards versus the national minimum wage

The national minimum wage from 1 July 2026 is $26.44/hr, $1004.9/week, annualised $52,255 (index 48.2). This is the absolute floor for adult employees not covered by an award. Modern awards set higher minimum rates for specific industries and roles. For example, the entry-level award floor is $25.74/hr, but many awards pay more. The Salary Index shows the national line at 100, with industries like retail trade at 75.9 and mining at 154.7.

When you salary sacrifice, your cash wage cannot fall below the applicable minimum. If you are covered by an award, you must receive at least the award rate in cash. If you are award-free, you must receive at least the national minimum wage. This means the maximum you can sacrifice is the difference between your gross salary and that minimum.

Examples

• A retail worker on $80,000 (index ~74) with an award minimum of $60,000 can sacrifice up to $20,000.
• A mining worker on $120,000 (index ~111) with an award minimum of $80,000 can sacrifice up to $40,000.
• A part-time worker earning $55,000 (index ~51) with no award, only the national minimum wage of $52,255, can sacrifice only $2,745.

Other limits on salary sacrifice

Super contributions

Salary sacrifice into super is a common strategy. However, the total concessional contributions (including employer super guarantee and salary sacrifice) cannot exceed the annual cap set by the ATO. The super guarantee is 12% from 1 July 2026, with a maximum contribution base of $270,830. The concessional cap is separate and not specified here, but it applies. You can sacrifice up to that cap minus your employer's super contributions.

Fringe benefits tax

Salary sacrifice for benefits like cars, laptops, or school fees may attract fringe benefits tax (FBT). Some benefits are exempt (e.g., certain work-related items) or have caps. The amount you can sacrifice for a car is limited by the statutory formula or operating cost method. These rules affect how much you can effectively sacrifice.

How salary sacrifice interacts with awards

Awards often include clauses about salary sacrifice. Many awards require that the employee's base rate of pay (the cash component) remains at least the award rate. Some awards allow salary sacrifice arrangements as long as the employee's total remuneration is not less than the award entitlement. Always check your award or agreement.

State and industry variations

Your ability to salary sacrifice also depends on your industry and state. For example, the states page shows that the ACT has the highest index at 109.9, while Tasmania is 88.6. Higher-paid industries like mining (index 154.7) offer more room for sacrifice than retail (75.9) or accommodation and food services (72.5). See industries for more.

Practical considerations

Salary sacrifice reduces your taxable income, which can lower your tax bill. But it also reduces your cash flow. The pay guides can help you understand award rates. Use the how the index works to see where your pay sits.

Conclusion

The amount you can salary sacrifice is not a fixed number. It depends on your gross salary, your award or minimum wage, super caps, and FBT rules. The most important rule: you cannot sacrifice below the applicable minimum wage or award rate. Always consult your award or agreement and seek advice from a tax professional.