Salary Packaging Solutions: What They Mean for Awards and the National Minimum Wage

How Salary Packaging Solutions Fit with Awards and the National Minimum Wage

Salary packaging solutions let you swap part of your gross salary for benefits like a car, laptop, or extra super contributions. They are popular in the not-for-profit sector and among public servants, but any employer can offer them. The key question for most workers is how these arrangements interact with the award or minimum wage that sets your floor.

The National Minimum Wage and Award Rates as a Floor

From 1 July 2026, the national minimum wage is $26.44 per hour, or $1004.90 per week. On the salary index, that is 48.2 – well below the national line of 100 ($108,352 annualised). Most employees are covered by a modern award, which sets a higher minimum. For example, the Retail Trade industry index is 75.9, and Accommodation and Food Services is 72.5. Award rates vary by classification and often include penalty rates, but the base rate is the minimum cash wage you must receive.

Salary packaging solutions cannot reduce your cash wage below that award or minimum rate. If you earn $30 per hour under a retail award, you can only sacrifice the amount above $30. The award rate is a hard floor. This is a critical rule from Fair Work: salary packaging is a voluntary reduction in exchange for a benefit, but it cannot take you under the legal minimum.

How the Salary Index Reflects Your Position

The salary index compares your gross annual ordinary-time earnings to the national line of 100. If you earn $120,000, your index is about 110. That means you have room to use salary packaging solutions. If you earn $55,000 (index 50.8), you are close to the minimum and may have little or no room to sacrifice. The index helps you see where you sit relative to the average full-time worker. For more on how the index is calculated, see how the index works.

State and Industry Differences

Your state and industry affect your typical pay and therefore your ability to salary package. In the ACT (index 109.9), average earnings are well above the national line, so many workers have headroom. In Tasmania (index 88.6), average earnings are lower, meaning fewer workers can sacrifice without hitting the award floor. Similarly, in Mining (index 154.7), high pay leaves plenty of room, while in Retail (index 75.9) or Accommodation (index 72.5), the floor is closer. Check your state's index on our states page and your industry's index on industries to see typical benchmarks.

Tax Benefits of Salary Packaging Solutions

One major reason to use salary packaging is to reduce taxable income. For the 2026–27 tax year, resident rates start at nil up to $18,200, then 15% to $45,000, 30% to $135,000, 37% to $190,000, and 45% above. Plus a 2% Medicare levy. By sacrificing part of your salary for a benefit, you lower your assessable income and potentially drop into a lower bracket. For example, if you earn $100,000 (index 92.3), sacrificing $10,000 into super could save you about $3,000 in tax plus Medicare levy. But remember that the sacrifice cannot reduce your cash wage below the award rate.

Salary Packaging and Super Guarantee

Salary sacrifice to super is a common salary packaging solution. From 1 July 2026, the super guarantee is 12% on ordinary time earnings, up to a maximum contribution base of $270,830. If you sacrifice part of your salary into super, those contributions are not counted as ordinary time earnings for super guarantee purposes. Your employer must still pay the 12% on your ordinary time earnings before the sacrifice. So your employer's super obligation is not reduced. This means salary packaging solutions can boost your retirement savings without cutting your employer's super contribution.

Practical Example: A Retail Worker on Award

Imagine a retail employee in Queensland (index 97.9) earning $60,000 (index 55.4). Their award rate under the Retail Award might be around $25–30 per hour. If they want to salary package a car worth $5,000 per year. They can only sacrifice the $5,000 from the $60,000 salary, but must keep at least the award rate. If the award rate is $30 per hour, and they work 38 hours per week, their weekly award wage is $1,140. Their actual weekly pay is $1,153.85 (based on $60,000 annual). They can sacrifice up to $13.85 per week. That works. If they earn exactly the award rate, they cannot sacrifice anything. This shows how salary packaging solutions are only available when you earn above the award floor.

Key Takeaways

• Salary packaging solutions are voluntary arrangements that reduce cash salary for benefits.
• The national minimum wage and award rates are cash floors that cannot be undercut.
• Your salary index shows where you sit against the national line; higher index means more room for packaging.
• Tax benefits can lower your tax bracket, but always check the award floor first.
• Super guarantee is not reduced by salary sacrifice to super.

For more general pay information, see Salary Index. For detailed award guides, visit pay guides. For more on salary packaging and tax, see topics.