Meals and entertainment salary packaging: how it affects your pay compared to award wages

What is meals and entertainment salary packaging?

Meals and entertainment salary packaging is an arrangement where you forgo part of your pre-tax salary in exchange for your employer providing or reimbursing meal and entertainment expenses. Common examples include restaurant meals, takeaway food, event tickets, and holiday accommodation. This type of packaging is often available to employees in the not-for-profit sector, public hospitals, and some government organisations. It can reduce your taxable income, potentially increasing your take-home pay, but it does not change the gross earnings figure used in the Salary Index.

How it relates to awards and the national minimum wage

The national minimum wage from 1 July 2026 is $26.44 per hour, or $1004.90 per week, annualised to $52,255. That gives a Salary Index of 48.2, meaning it is just under half the full-time adult ordinary-time earnings line of $108,352. Modern awards set higher minimum rates for many industries and occupations. For example, the Retail trade award has an index of 75.9, while Accommodation and food services sits at 72.5. These award rates are the legal minimums for gross pay before any salary sacrifice.

When you enter a meals and entertainment salary packaging arrangement, your employer still pays you at least the award or national minimum wage in gross terms. The packaging is a separate agreement that reduces your taxable salary, but your gross ordinary-time earnings (the figure used for the index) remain at or above the minimum. This means the index itself is unaffected by salary packaging. However, your net pay can be higher because you pay less income tax and Medicare levy on the packaged amount.

Where does it sit on the Salary Index?

The Salary Index measures gross yearly ordinary-time earnings divided by the national line ($108,352) times 100. Meals and entertainment salary packaging does not appear in that calculation because it is a benefit, not a component of gross earnings. If you are on an award wage, your gross earnings determine your index position. For instance, a full-time adult worker on the Retail trade award might have an index around 75.9, while a worker in Professional, scientific and technical services could be at 114.7. The packaging adds value on top, but the index remains a gross benchmark.

Practical examples

Consider a full-time employee in the Health care and social assistance industry, where the industry index is 97.8 (just below the national line). If that employee earns $106,000 gross per year (index 97.8), they could salary package up to $9,010 for meal entertainment under certain FBT exemptions (if working for a public hospital or charity). That $9,010 is taken from pre-tax salary, reducing taxable income to $96,990. The employee still receives the same gross pay of $106,000, but the tax saving increases take-home pay. The index remains 97.8 because gross earnings haven't changed.

In contrast, a worker on the national minimum wage ($52,255, index 48.2) would have less room to salary package because the gross pay is already low. Salary packaging cannot reduce gross pay below the minimum, so the maximum packaged amount is limited to the difference between gross pay and the minimum. For a minimum wage earner, that difference is zero – they cannot sacrifice any salary without falling below the legal floor. Therefore, meals and entertainment salary packaging is more relevant for workers earning above the award or minimum rate.

Awards, super, and tax considerations

Award wages rose by 4.75% from 1 July 2026, and the national minimum wage increased accordingly. The super guarantee is 12% from the same date, with a maximum contribution base of $270,830. When you salary package meals and entertainment, your employer's super obligation may reduce because your ordinary time earnings (OTE) decrease. However, the OTE cannot fall below the award or national minimum wage. For example, if your award rate is $30 per hour and you package $5 per hour, your OTE becomes $25, which is below the award rate – that is not allowed. So packaging must be structured to keep OTE at or above the minimum.

Tax-wise, the 2026–27 resident 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. Medicare levy is 2%. Salary packaging reduces your taxable income, potentially moving you into a lower tax bracket. The Medicare levy surcharge and HELP repayments are not considered here, but they can also be affected.

State and industry context

The value of meals and entertainment salary packaging can vary by state because of different FBT exemptions and state payroll tax treatments. For example, in the ACT (index 109.9) and WA (106.9), higher average earnings may make packaging more beneficial. In Tasmania (88.6) and SA (94.6), lower average earnings may limit the scope. The states page shows how each state compares to the national line. Similarly, industries with higher indexes, such as Mining (154.7) and Professional services (114.7), often have more room for packaging. Lower-index industries like Accommodation and food services (72.5) may have less flexibility.

Conclusion

Meals and entertainment salary packaging is a valuable benefit that can boost your take-home pay without altering your gross earnings or your position on the Salary Index. It operates within the framework of awards and the national minimum wage, ensuring that your gross pay never falls below the legal minimum. To understand how packaging might affect your specific situation, check your award or agreement, and consult a tax professional. For more on how pay compares across roles, see the pay guides and how the index works.