Quick Summary
Quick Summary
- High income threshold increases to $163,000 on 1 July 2026 — up from $160,500
- Employees in the $160,500–$163,000 band must be reassessed for award eligibility and paid accordingly
- Superannuation (11.5%) is mandatory for all employees, regardless of income level
- Failure to pay applicable award rates triggers penalties up to $5.46 million — audit your payroll now
On 1 July 2026, Australia’s high income threshold increases to $163,000 per annum. This is one of the most overlooked wage threshold changes facing employers this financial year, yet it has direct consequences for superannuation, award classification, and employee eligibility for certain protections.
As an employer, you need to understand exactly how this threshold works, who it affects, and what you need to do to ensure compliance. Get it wrong, and you risk underpayment claims or incorrect superannuation contributions.
What Is the High Income Threshold?
The high income threshold is an annual salary level set by the Fair Work Commission. Employees whose income exceeds this threshold are excluded from the automatic award classification rules and are instead covered by the National Employment Standards (NES) only.
Who Does This Affect?
Three main groups of employees are affected:
- Employees currently paid above $160,500. These workers are already above the threshold and remain above it. No change to their coverage.
- Employees paid between $160,500–$163,000. These are the affected group. They were previously exempt from the award. From 1 July, they may now fall under award coverage if their actual duties suggest they belong to a particular award classification.
- Employees earning exactly $163,000 or above. These remain exempt from award coverage and are covered by the NES only.
Superannuation Impact: The Real Risk
This is where most employers make mistakes. The high income threshold also determines superannuation preservation age and contribution caps.
Award Classification: The New Complexity
This is the biggest operational change for employers with staff in the $160,500–$163,000 band.
Before 1 July 2026, if someone earned more than $160,500, you didn’t need to worry about which award applied. They were automatically exempt.
- They fall under a retail award (if they work in retail)
- They fall under a hospitality award (if they work in hospitality)
- They fall under an administrative services award (if they work in admin)
- Or they might not fall under any award if no applicable award covers their work
Casual Employees & High Income Threshold
Casual employees above the threshold are also exempt from award coverage. But on 1 July 2026, any casual earning between $160,500–$163,000 needs to be reassessed for award eligibility.
The gotcha: some awards require casual rates to be calculated as a daily or hourly rate. If an award applies to a casual, their ongoing hourly rate must be at or above the award’s casual rate.
If a casual’s current hourly rate is below the applicable award rate, their hourly rate must increase from 1 July 2026.
📅 Action Required: 1 July 2026 High Income Threshold Change
The high income threshold increases to $163,000 on 1 July 2026. If you have staff earning $160,500–$163,000, audit their award eligibility now. If an award applies and the rate is higher than their current pay, you must increase their salary from 1 July 2026 — failure to do so is a serious underpayment contravention.
Key Takeaways
Key Takeaways for Employers
- ✓Start a payroll audit of all staff earning $160,500–$165,000 this month
- ✓Identify which modern awards (if any) cover each employee’s role
- ✓Compare award rates to current salaries; increase pay where required
- ✓Update employment contracts and payroll systems by 1 July 2026
- ✓Ensure superannuation is paid for high-income staff at the standard rate
- ✓Document your compliance process to defend against future Fair Work investigations
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How to Calculate Annual Income for the Threshold
The threshold applies to ordinary time earnings (OTE) — not total remuneration.
Included in OTE:
- Base salary/wages
- Regular allowances (e.g., shift allowance, location allowance, qualification allowance)
- Penalty rates for ordinary hours
- Regular part-time or casual hourly rates (averaged over 26 weeks if not consistent)
- Bonuses
- Commissions
- Redundancy payouts
- Performance payments
- One-off or irregular payments
- Superannuation
- Reimbursements (e.g., travel, uniforms)
What About Enterprise Agreements?
If an employee is covered by an enterprise agreement (EBA), the high income threshold does NOT override the agreement. Enterprise agreements set their own income thresholds and classification rules.
The $163,000 threshold only applies to employees covered by a modern award or the NES with no EBA.
Step-by-Step: What You Need to Do by 1 July 2026
Step 1: Audit your payroll. Pull a list of all employees earning between $160,500–$165,000. Include casual and part-time staff, calculating their annualised OTE.
Step 2: Identify applicable awards. For each employee in that band, determine:
- What is their primary job role?
- What award covers that role (if any)?
- What is the award rate for their classification?
Penalties for Non-Compliance
Failure to pay an applicable award rate is an underpayment contraventions. From 1 July 2026, the maximum civil penalty is now up to $5.46 million (for corporations) for systemic underpayment.
Even single instances of underpayment can trigger penalties of up to $546,000 per contravention.
What If You Have an Employee Above the New Threshold?
Employees earning $163,000 or more remain outside award coverage and are covered by the NES only. This means:
- They’re not entitled to award rates, conditions, or loadings
- They still get NES protections: annual leave (4 weeks), long service leave, maximum 38 hours/week (and reasonable additional hours), public holidays, unfair dismissal protection, general protections
- They’re not exempt from superannuation — you still pay 11.5%
- Any agreement between you and the employee (employment contract) can set conditions above the NES, but cannot fall below it
For these employees, ensure your employment contract is clear about what they are and aren’t entitled to. A well-drafted contract prevents disputes.
Key Takeaways
- From 1 July 2026, the high income threshold rises to $163,000
- Employees earning above this are exempt from award coverage but still covered by the NES
- Employees earning $160,500–$163,000 need to be reassessed for award eligibility
- If an award applies and pays more than their current salary, you must increase their pay
- Always pay superannuation for all employees, regardless of income level
- Calculate income on ordinary time earnings (OTE), which excludes bonuses, commissions, and one-off payments
- Maximum penalties for underpayment are now $5.46 million
- Audit your payroll now; implement changes by 1 July 2026
This threshold change might seem technical, but it directly affects payroll compliance and employee entitlements. Getting it right protects both your business and your staff.
Frequently Asked Questions
The high income threshold increases from $160,500 to $163,000 per annum on 1 July 2026. Employees earning above this amount are exempt from modern award coverage but remain covered by the National Employment Standards (NES). The threshold is indexed annually on 1 July based on the Consumer Price Index.
Yes, absolutely. All employees are entitled to superannuation at the employer contribution rate (currently 11.5%, rising to 12% in future) regardless of income level. The high income threshold does NOT exempt anyone from super contributions. Failure to pay super for high-income staff is a serious underpayment contravention.
If their ordinary time earnings fall below $163,000 and a modern award covers their role, they must be paid at or above the award rate from 1 July 2026. If you’ve been underpaying them, you may owe back-pay. You cannot contract out of award coverage once they fall below the threshold.
Use ordinary time earnings (OTE), which includes base salary, regular allowances, and penalty rates for ordinary hours. It excludes bonuses, commissions, one-off payments, redundancy, and superannuation. For casuals, calculate the annualised value of their average hourly rate over the previous 26 weeks.
Review employment contracts for employees earning $160,500–$165,000. Update them to reflect their correct award classification (if applicable) and confirm superannuation and other entitlements. For employees earning $163,000+, ensure the contract clearly states they are covered by the NES only and not a modern award.
No. If an employee is covered by a registered enterprise agreement (EBA), the high income threshold does not override it. The EBA sets its own threshold and classification rules. Check your EBA’s specific provisions; some may have different income thresholds or assessment methods.
Maximum civil penalties for underpayment are now up to $5.46 million for corporations (systemic breaches) and up to $546,000 per individual contravention. The Fair Work Ombudsman actively investigates underpayment complaints. Even a single instance of underpayment can trigger penalties and back-pay claims.
Start immediately. Pull a report of all employees earning between $160,500–$165,000, identify applicable awards, compare award rates to current salaries, and calculate any adjustments needed by 1 July 2026. Document your audit process in case of future compliance questions.
You can offer a salary above the threshold as part of a genuine negotiated agreement. However, you cannot artificially inflate pay to avoid award coverage if the employee’s true OTE is below $163,000. The Fair Work Ombudsman looks for sham arrangements; if detected, penalties and back-pay claims follow.
The change takes effect on 1 July 2026. You should complete your payroll audit and implement any required changes by that date. If back-pay is owed due to misclassification, it is typically calculated from 1 July 2026, but liability may extend further back if you hired the employee before that date under a false classification.
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