How salary packaging and meal entertainment cards work with awards and the national minimum wage

Salary packaging and meal entertainment cards: what they mean for awards and the national minimum wage

Salary packaging and meal entertainment cards are popular ways to reduce tax, but how do they fit with Australia’s award system and the national minimum wage? If you’re on a modern award or earning at the minimum, you need to know that packaging can’t take you below those legal floors. Let’s break it down.

What is salary packaging?

Salary packaging (also called salary sacrificing) is an arrangement where you agree to give up part of your pre-tax salary in exchange for a benefit your employer provides. Common benefits include cars, laptops, super contributions, and meal entertainment cards. The benefit is often exempt from or subject to lower tax, so you end up with more value than if you’d taken the cash and paid tax on it. But the key rule is that your total remuneration must still meet the minimum standards set by your award or the National Employment Standards.

Meal entertainment cards explained

A meal entertainment card is a specific salary sacrifice benefit that lets you pay for meals, drinks, and entertainment (like dining out or event tickets) using pre-tax dollars. These cards are popular in industries like healthcare, education, and not-for-profit, where FBT exemptions or caps apply. For example, a nurse on a public hospital award might salary package a meal card worth $2,650 per year FBT-free. The card doesn’t change their award classification or hourly rate – it’s an extra benefit on top of their minimum entitlements.

Awards and the national minimum wage: the floor that can’t be broken

Modern awards set minimum pay rates, allowances, and conditions for specific industries and occupations. The national minimum wage (currently $26.44 per hour from 1 July 2026) is the absolute floor for all employees not covered by an award. Salary packaging cannot reduce your cash pay below these minimums. For instance, if your award says you must be paid $30 per hour, you cannot agree to receive $25 per hour plus a meal card. The cash component must be at least the award rate. The Australian Fair Work Ombudsman is clear: salary sacrifice arrangements must not result in you earning less than the minimum wage or award rate.

How the salary index treats packaging

The Salary Index compares your gross ordinary-time earnings to the national line of 100 (full-time adult ordinary-time earnings of $108,352 per year as of May 2026). Because the index uses gross earnings before any salary sacrifice, your packaged amount doesn’t change your index figure. If you earn $80,000 gross and sacrifice $10,000 for a meal card, your index is still based on $80,000. The benefit itself is not counted as earnings for index purposes. So packaging doesn’t move your index up or down – it’s a separate tax strategy.

Tax and super considerations

Salary packaging can reduce your taxable income, which may lower the tax you pay. For the 2026–27 year, resident tax rates start at 0% up to $18,200, then 15% up to $45,000, 30% up to $135,000, and so on. By sacrificing part of your salary, you might drop into a lower bracket. But remember: the super guarantee (12% from 1 July 2026) is calculated on your ordinary time earnings, which may be reduced by salary sacrifice if your employer uses the ‘salary sacrifice’ method. Check your award or agreement – some awards require super to be paid on the full notional salary. Meal entertainment cards are generally not subject to super, so they don’t affect your super contributions.

Practical examples

Example 1: Retail worker on the Retail Award The retail trade industry has a salary index of 75.9, well below the national line. A retail assistant earning $55,000 gross might salary package a meal card worth $2,000. Their gross earnings for index purposes remain $55,000 (index 50.8). The award minimum for their classification is, say, $24 per hour. The packaging cannot reduce their cash pay below that $24 per hour. The meal card is a tax-effective extra, but it doesn’t change their award rate.

Example 2: Teacher on the Education Award Education and training has an index of 105.5, slightly above the national line. A teacher earning $110,000 gross (index 101.5) might salary package a meal card up to the FBT exemption cap for public schools. Their gross earnings remain $110,000 for index purposes. The award minimum for a teacher is higher than the national minimum wage, so packaging is fine as long as the cash component stays above the award rate.

Example 3: Hospitality worker on the Hospitality Award Accommodation and food services has an index of 72.5, one of the lowest. A hospitality worker earning $45,000 gross (index 41.5) might consider packaging a meal card, but because their earnings are already low, the cash component after sacrifice could fall below the award rate. That’s not allowed. Always check that your cash pay after packaging is at least the award minimum.

State and industry differences

Your state can affect your salary index but not your award rate. For example, Western Australia has a state index of 106.9, while Tasmania is 88.6. But award rates are set nationally or by state-specific awards. Salary packaging rules are mostly federal (FBT, tax) but some state public sector caps apply. For more on state benchmarks, see our states page. Industry benchmarks are on our industries page.

Key takeaways

• Salary packaging and meal entertainment cards are voluntary arrangements that can reduce tax, but they cannot undercut award rates or the national minimum wage.
• The salary index uses gross earnings before packaging, so your index stays the same.
• Always check your award or agreement for any rules about salary sacrifice and super.
• For more on how pay compares, see our pay guides and how the index works.