
Get exclusive money-saving offers and guides
Straight to your inbox
Updated . What changed?
We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!
When you salary sacrifice your home loan repayments, you pay your mortgage in pre-tax dollars, which is like getting a discount of up to 45% off your loan. Whatever tax bracket you pay (the highest being 45%) is the value you get, as the mortgage payment is made before you pay tax on that income.
Being able to salary sacrifice your mortgage will depend on the company and industry you work in. It's usually only offered by employers in the health, charity and other not-for-profit industries and is only available for owner occupier home loans, not investment loans.
A salary sacrifice arrangement is worth considering if you earn a high income because you can enjoy significant tax benefits by reducing your taxable income.
Depending on your employer, you may be able to use salary sacrifice to pay off your home loan. If you work for a public or private hospital, a non-government organisation or a not-for-profit organisation such as a charity, you may be eligible to salary sacrifice your mortgage.
Ask your employer if the company is willing to support salary sacrificing, and check with the Australian Taxation Office to make sure you’re eligible to salary sacrifice your home loan. This option is typically only available to owner-occupiers, not to those paying off an investment property.
Next, check if your lender will accept salary sacrifice payments on your mortgage. Some banks may refuse salary sacrifice repayments, so you may need to shop around for a suitable lender so you can refinance.
If you’re in any doubt about whether this option could work for you, ask your accountant for advice.
Also referred to as salary packaging, a salary sacrifice arrangement with your employer allows you to pay for certain items out of your pre-tax salary.
By using your pre-tax salary to pay off an ongoing expense, you will reduce your total taxable income, which means you end up paying less tax. Your employer may need to pay FBT on the benefits you receive (non-profit organisations are exempt from this tax up to a certain limit), so you’ll need your employer’s approval to do this.
You can only set up a salary sacrifice arrangement on any future income you earn. This means you can’t salary sacrifice any salary that you have already earned.
Learn more in our in-depth salary sacrificing guide.
The Government announced in its 2017 budget that first home buyers will be able to salary sacrifice some of their income into their superannuation to be used as a deposit for a home. This is called the First Home Super Saver Scheme.
The scheme will work by allowing first home buyers to make voluntary contributions into their super up to a maximum of $30,000, with a yearly cap of $15,000. Contributions made through this scheme will be taxed at only 15%, so those using it can save on tax.
Note that under this scheme first home buyers will not be able to withdraw their non-scheme super contributions to pay for their home. Some changes were introduced in 2019 regarding how the scheme works. The latest updates are available on the government website.
If you’re eligible to salary sacrifice your home loan, this sort of arrangement can have several benefits.
Be aware of a few potential pitfalls or roadblocks associated with salary sacrificing.
If salary sacrificing your mortgage repayments sounds appealing, follow these simple steps to check whether it’s the right home loan repayment approach for you:
Image: Shutterstock
Our experts crunch the numbers to help you work out the best place to park your money: is it your mortgage or your super fund?
One in four (25%) Australians are worried about how they will pay the rent or mortgage after Christmas, according to new research by Finder, Australia’s most visited comparison site. Find out how the Finder App can help save you money in 2021.
Read these top tips to help you launch a successful fitness company.
Here's how you could turn your love for vintage clothes into a money-making enterprise.
Find out what you need to know before starting an accounting business.
What you need to know if you're looking to launch your own auto electrician company.
Follow this ultimate recipe for how to start your cooking business.
If you love spending time with dogs and you know how to train them, you might want to start a dog training business.
Your guide to home loan LVRs and how you can determine your loan to value ratio.
The ins and outs of life insurance if you have epilepsy.