Home loan salary sacrifice – example
- Your annual salary is $90,000 before tax, or $7,500 a month.
- Your mortgage repayment is $1,200 a month ($14,400 annually).
- Your employer offers to pay your $1,200 monthly repayments and reduces your monthly salary to $6,300 a month before tax.
- Your taxable income has shrunk from $90,000 to $75,600.
- Instead of paying $21,517 in taxes (including the Medicare levy) your tax bill shrinks to $16,549.
- You save $4,968 in taxes.
FBT costs
In the above example the employer would have to pay the FBT on the $14,400 mortgage repayment benefit.
The ATO calculates FBT by multiplying the value of the benefit at 1.8868.
- 1.8868 x 14,400 = $27,169.92
And then this amount is taxed at 47%, equalling a tax obligation of $12,770 to the employer. This is why salary sacrificing for an employee's mortgage repayments is really only offered by organisations with FBT-exempt status.