What you can salary sacrifice under awards and the national minimum wage

What you can salary sacrifice under awards and the national minimum wage

Salary sacrifice is an arrangement where you agree to forgo part of your salary in exchange for benefits like extra super, a car, or a laptop. It can reduce your taxable income and boost your savings, but it must not take your pay below the legal minimums set by awards or the national minimum wage. This guide explains how salary sacrifice works in Australia, using the Salary Index to show where pay figures sit against the national line.

How salary sacrifice interacts with awards and the national minimum wage

The national minimum wage from 1 July 2026 is $26.44 per hour, $1,004.90 per week, or $52,255 annualised. That gives an index of 48.2, meaning it is 48.2% of full-time adult ordinary-time earnings ($108,352 annualised). Many modern awards set higher minimum rates. For example, the Retail trade industry has an index of 75.9, which annualises to about $82,239. The Health care and social assistance industry sits at index 97.8, or about $105,968 annualised.

When you salary sacrifice, your employer must still pay you at least the award or national minimum wage in total benefits (cash plus the benefit). If your base salary is already at the minimum, you cannot sacrifice any further without breaking the law. For example, a retail worker earning $82,239 could salary sacrifice a portion above that amount, but the sacrifice cannot reduce their total remuneration below the award minimum.

Common salary sacrifice benefits

What can you salary sacrifice? The most common items are:

• Additional super contributions: You can sacrifice part of your salary into your super fund. This amount is taxed at 15% (up to the concessional cap) instead of your marginal rate. For 2026–27, the concessional cap is $30,000 (but check the ATO for updates).
• Novated lease on a car: A car lease paid from pre-tax salary, including running costs. Fringe benefits tax (FBT) may apply, but many employers use salary packaging to reduce the FBT.
• Electronic devices: Laptops, tablets, or phones used for work can be salary sacrificed, often with FBT exemptions if primarily work-related.
• Other benefits: Some employers offer gym memberships, childcare, or parking. Each benefit has specific tax rules.

Tax and super implications

Salary sacrifice reduces your taxable income. For a resident in 2026–27, the tax brackets are: nil up to $18,200, then 15% to $45,000, 30% to $135,000, 37% to $190,000, and 45% above. The Medicare levy is 2%. If you sacrifice $10,000 into super, you save up to $3,400 in tax (if in the 34.5% bracket including Medicare). The super guarantee is 12% from 1 July 2026, calculated on your ordinary time earnings before sacrifice. That means your employer’s SG contributions may drop if you sacrifice salary, but your total super can still increase.

How the Salary Index relates

The Salary Index measures gross ordinary-time earnings, not after salary sacrifice. So if you earn $90,000 annualised (index 83.0) and sacrifice $10,000, your taxable income drops to $80,000, but the index remains 83.0. The index is a benchmark for comparing pay across industries and states. For example, Western Australia has an index of 106.9, while Tasmania is 88.6. Salary sacrifice does not change those figures.

Practical examples

**Example 1: Health care worker on award A health care worker on the national minimum wage would earn $52,255 (index 48.2) but most awards pay more. Suppose the award minimum is $105,968 (index 97.8). You can salary sacrifice up to the concessional cap without going below that award minimum. If you sacrifice $15,000 into super, your total benefits remain above $105,968. The sacrifice reduces your taxable income to $90,968, saving about $4,500 in tax (depending on your bracket.

**Example 2: Retail employee on award A retail employee on the national minimum wage cannot salary sacrifice because they are already at the floor. But if their award pays $82,239 (index 75.9), they can sacrifice a portion. For instance, $5,000 into a novated lease. Their taxable income becomes $77,239, saving about $1,700 in tax.

Key rules to remember

• Salary sacrifice must not reduce pay below the award or national minimum wage.
• The benefit must be approved by your employer and comply with your award.
• FBT may apply to some benefits; check with your employer.
• Super guarantee is calculated on pre-sacrifice ordinary time earnings.
• Always review your pay guides and consult a tax professional.