Salary Packaging a Mortgage: The Best and Easy Way of Maximazing Your Tax-Free Money 🏠

Salary Packaging a Mortgage is one of the most valuable benefits your employer can offer. It’s not only one of the best ways to maximize your savings, but it’s also incredibly easy to apply for and manage. In fact, depending on your situation, you may be able to use your entire salary packaging threshold just for your mortgage, allowing you to significantly reduce your taxable income and save more money each year.

How Salary Package a Mortgage works?

Owning a home is often seen as a Dream, but those mortgage repayments can sometimes feel overwhelming. That’s why many people turn to salary packaging their mortgage as a smart way to ease the burden. Normally, you’d be paying your mortgage with your after-tax income, but with salary packaging, you can make those payments before tax is deducted. This means you could potentially pay off your home loan faster while keeping more of your income for the things you love.

Who Can Salary Package a Mortgage?

Salary packaging your mortgage is a fantastic benefit available to those working in specific industries. If you’re employed in the healthcare or charity sectors, or in a rebatable organization, you could be eligible to take advantage of this option. This means that if you work in hospitals, charitable organizations, or certain government bodies, you can use pre-tax income to make your mortgage payments, potentially saving thousands in taxes.

• Healthcare industry
• Charity sectors
• Rabatable organization

How Much Can I Package Towards Mortgage?

Employees in the healthcare and charity sectors can use salary packaging for mortgage repayments under the «Living Expenses» category, which is part of the ATO-approved salary packaging benefits. Here’s how it typically works:

• Healthcare Sector Employees: You can package up to $9,010 of your pre-tax income towards living expenses, which includes mortgage repayments.
• Charity Sector Employees: You have a higher cap and can package up to $15,900 of your pre-tax income towards living expenses, including mortgage repayments.

This means that the amounts mentioned can be used to pay off your mortgage using pre-tax income. However, it’s important to check with your specific employer and salary packaging provider to confirm the exact limits and conditions that apply to your situation.

For instance, although I work in the Healthcare sector, my employer is a non-profit hospital. This qualifies me under the charity sector guidelines, allowing me to salary package up to $15,900.

How Much Could I Save Through Salary Packaging Mortgage Repayments?

The table below is an example of how salary packaging your mortgage repayments can potentially reduce your taxable income and save you money.

If Your Gross Salary is $100,000 a Year You Can Save…

Gross salary	$100,000
Mortgage Salary Package Cap	$15,900
Mortgage (without packaging)	$56,868
Mortgage (with salary packaging)	$61,675
Net Benefit	$5,167.50

In the table above, we’ve calculated the estimated savings for an employee in the charity sector with an annual gross salary of $100,000. We’ve assumed this employee does not have a HECS/HELP debt.

This employee can salary package up to $15,900 towards their mortgage repayments as part of their living expenses cap. By comparing salary packaging to paying for these expenses after tax, you could potentially save $5,167.50 each year!

Discover How Much You Can Save by Salary Packaging Your Mortgage!

Let’s explain first what these concepts are:

• Gross Salary: The annual salary before taxes.
• Mortgage Salary Package Cap: The amount that can be packaged (pre-tax) towards mortgage payments.
• Mortgage (without packaging): The total amount of mortgage payments made after taxes.
• Mortgage (with salary packaging): The total amount of mortgage payments made before taxes.
• Net Benefit: The difference between paying the mortgage without packaging and paying it with packaging.

To determine the actual savings, we need to consider how salary packaging reduces the taxable income and, therefore, the amount of taxes owed.

• Gross Salary: $100,000
• Mortgage Salary Package Cap: $15,900
• Salary after Packaging: $100,000 – $15,900 = $84,100

Thanks to a salary sacrifice mortgage, you’re now paying taxes on $84,100 instead of $100,000 because you’ve sacrificed part of your salary to cover your mortgage payments. Sounds good, right?

The savings are calculated based on the difference between the cost of mortgage payments with packaging and without packaging, taking into account that packaging reduces taxable income and therefore taxes.

To obtain the net benefit, we need to calculate the tax savings resulting from salary packaging the mortgage and compare it with the total cost of mortgage payments after taxes.

To simplify, assume that the tax savings are proportional to the packaged amount.

• Marginal Tax Rate: Assume the marginal tax rate for a $100,000 salary is approximately 32.5% (for this example, actual rates may vary based on exact tax brackets and deductions).
• Tax Savings: $15,900 (packaged amount) * 32.5% (tax rate) = $5,167.50

You could be saving up to $5167,50 if you start using your Salary Packaging benefit on your Mortgage

Best Salary Packaging Providers to Salary Packaging a Mortgage

Start investing on your salary sacrifice for your mortgage payments with the best Salary Packging providers for your Home loan.

Salary Packaging a Mortage Calculator

Our Salary Packaging Mortgage Calculator helps you determine the tax savings from salary packaging towards your mortgage. Here’s a quick overview:

This tool calculates your potential tax savings by applying the salary sacrifice, considering a 32.5% tax rate, and shows the total savings over the mortgage term. Perfect for maximizing your financial benefits through salary packaging.

Conclusion about Salary Packaging a Mortgage

Salary packaging a mortgage can be a great way to reduce your taxable income and make mortgage repayments more manageable. However, if you are currently receiving government assistance or other benefits, salary packaging might influence those benefits. Reducing your taxable income through salary packaging could affect your eligibility or the amount of government support you receive. Before proceeding, it’s essential to assess how salary packaging might impact any existing benefits to ensure you make the most informed financial decision.