Non for Profit Salary Packaging: How Awards and the Minimum Wage Set the Floor

What is non for profit salary packaging?

Non for profit salary packaging (often called salary sacrifice) allows employees of eligible not-for-profit organisations to exchange part of their pre-tax salary for benefits such as additional superannuation, a car, or electronic devices. Because these benefits are often exempt from fringe benefits tax (FBT) for certain NFP employers, employees can reduce their taxable income and increase their take-home pay. However, this arrangement must not undercut the minimum pay protections set by modern awards or the national minimum wage.

Awards versus the national minimum wage

Australia’s pay system has two main safety nets: the national minimum wage and modern awards. The national minimum wage from 1 July 2026 is $26.44 per hour, $1,004.90 per week, annualised $52,255. On the Salary Index, that’s 48.2—well below the national line of 100. Modern awards set higher minimum rates for specific industries and occupations. For example, the Health care and social assistance industry has an index of 97.8, meaning typical award rates in that sector are close to the national average. Awards also include classification structures, penalty rates, and allowances.

When you salary package, your gross salary must remain at or above the applicable award rate or the national minimum wage (if no award covers you). This is a legal requirement under the Fair Work Act. So if you’re a community services worker covered by the SCHADS award with a minimum hourly rate of $28.50, your gross salary after packaging cannot drop below that rate. The packaging simply redirects part of your pay to a benefit; it doesn’t reduce your total remuneration below the floor.

How salary packaging interacts with the floor

Let’s take a concrete example. A nurse in a public hospital (a common NFP employer) earns $80,000 gross per year. The relevant award rate for a registered nurse might be around $75,000, so $80,000 is above the floor. They choose to salary package $15,000 for a car. Their gross salary remains $80,000, but taxable income drops to $65,000. That saves them tax at their marginal rate (30% in the 2026–27 brackets, plus 2% Medicare levy). Their take-home pay increases, but the award floor is still met because the gross salary hasn’t changed.

Now consider a part-time worker earning just above the national minimum wage. If they package too much, their gross salary could fall below the minimum. That’s not allowed. The employer must ensure the gross salary (before packaging) stays at or above the relevant minimum. So salary packaging works best when your gross pay is comfortably above the floor.

Industry and state context

The industries page shows how different sectors compare. For NFP-heavy industries like Health care and social assistance (index 97.8) and Education and training (index 105.5), typical pay is near or above the national line. That leaves room for packaging. In contrast, Retail trade (index 75.9) or Accommodation and food services (index 72.5) have lower typical pay, so packaging may be more constrained.

State differences also matter. For example, the ACT has an index of 109.9, while Tasmania is 88.6. If you work for an NFP in the ACT, your higher base pay gives more scope for packaging. In Tasmania, you’d need to be careful not to dip below award rates. You can compare state indices on the states page.

Tax and super considerations

Salary packaging affects your tax, but the super guarantee (12% from 1 July 2026) is calculated on your ordinary time earnings before packaging. So your employer still pays super on your full gross salary, up to the maximum contribution base of $270,830. That’s a key protection—packaging doesn’t reduce your super.

Resident tax rates for 2026–27 (excluding Medicare) start at nil up to $18,200, then 15% to $45,000, 30% to $135,000, 37% to $190,000, and 45% above. Adding the 2% Medicare levy, packaging can shift you into a lower bracket, increasing take-home pay. But again, the award floor is the limit.

Practical tips

• Check your award classification. Use pay guides from the Fair Work Ombudsman to find your minimum rate.
• Calculate your gross salary after packaging. It must stay above that rate.
• Remember that salary packaging benefits like cars or laptops may have FBT exemptions for eligible NFP employers, but the packaging amount itself is still part of your total remuneration.
• If you’re unsure, ask your employer or a tax adviser. The how the index works page explains how the Salary Index benchmarks pay, but it’s not a substitute for award interpretation.

The bottom line

Non for profit salary packaging is a valuable way to boost take-home pay, but it operates within the safety net of awards and the national minimum wage. The floor cannot be breached. By understanding your award rate and using the Salary Index to see where your pay sits nationally, you can make informed decisions about packaging. For more on related topics, visit the topics page.