Salary Sacrifice Mortgage

Salary sacrifice packages are a convenient way to save tax whilst paying off expenses and they are slowly becoming more popular.

However if your salary is packaged it may affect the way that the banks view your income. Your taxable income is lower and therefore some banks may believe this lowers your ability to afford a mortgage now.

We work with many different lenders and only apply with those willing to accept salary sacrificing and are most likely to approve your loan. Read on to find out more!

How do the banks view salary sacrifice packaging?

Although salary sacrifice packages offer benefits such as tax exemptions, many individuals are concerned that the banks will not include the amount that they have sacrificed as forming part of their gross taxable income. This money is obviously not represented on a group certificate, so banks often doubt the state of your finances. This can affect the success of your loan application.

How we can help!

Most banks disregard the earnings that have been sacrificed and assess your ability to repay the loan based on your gross income. However, we know a major lender that will accept all of your packaged income! This means you may be entitled to borrow more.

Want to find out more information? Enquire online or contact us on 1300 886 115 and speak to our expert mortgage brokers.

How do they view my income?

Banks do not understand salary packaging! Some major lenders will decline the loan outright based solely on your group certificate. Additionally, the banks find payslips of those that salary difficult to interpret. As a result, some lenders believe that your gross income, as evidenced on your documentation, should be taxed with standard rates.

What do I need to provide?

It largely depends on the lender; however most require that you supply a letter of employment as well as some additional documentation.

How much can I borrow?

You may be entitled to borrow up to 95% LVR, as long as your finances are in check and you can meet all lending criteria, including stable employment history, good credit rating and a general ability to afford the debt.

What is ‘salary sacrifice’?

A salary sacrifice package is one that enables employees to pay off a significant amount of their personal expenses before their income is taxed; saving the income tax otherwise payable on the remuneration you sacrifice. As a result, payments on cars, laptops, phones, groceries, rent or your mortgage comes directly out of your pay before your taxable salary is determined.

This arrangement is offered by many employers, even for some working on probation or a lot of overtime. It can result in substantial savings. Despite the fact that your salary is reduced, your annual tax bill is also reduced! This means that you save tax on everyday goods and services at no risk to your employer.

Who receives these packages?

Most people receiving these packages work for non-government, community organization and charities. These may include health promotion charities, public benevolent institutions and other areas such as public ambulance services. However, salary sacrifice packages are offered in a variety of jobs and are not restricted to these types.

Do you receive these packages and have a property in mind? Call us on 1300 886 115 or Enquire online today!

Why do organisations ‘salary sacrifice’?

These organisations generally cannot afford to pay their workers the same amount as companies in the private sector and thus have difficulty attracting quality staff. The only additional benefits for employees of such organisations are the tax exemptions that apply as a result of salary sacrifice packaging.

What expenses can be salary packaged?

There are a variety of types of salary packaging, however, the most common types include:

Superannuation packaging:
This allows employees to make their super contributions with their pre-taxed dollars, meaning that the contributions don’t get taxed as income before they are paid into the super fund. This results in more money in your super fund, although you have contributed less. If are sacrificing a portion of your salary as a super contribution, some lenders may view this as a voluntary contribution and will include it as part of your gross income.

Novated lease:
This lease assists employees with financing a vehicle from their employer. The costs of the car and the related expenses may be salary packaged so that you do not have to pay tax on those instalments.

Rent is generally allowed to be salary packaged.

Mortgage repayments:
Salary packing your mortgage is one of the best ways to minimise tax. However, if this forms part of your salary package it is essential that the payment is made directly to the mortgagee as soon as it falls due. You must have your bank account set up in a way that enables this and the payment must be made the date the interest on the loan is charged, otherwise you will fall into arrears.

This is one of the most common forms of salary packaging. Those that choose to buy a new laptop, pay for it out of their earnings before tax applies. This can save large amounts of money.

NOTE: Employees must be aware that any salary payment must go directly to that expense and not personal bank account.

Contact us today!

We are mortgage experts and have experience dealing with customers who encounter difficulties having their tax exempted earnings included as part of their gross income. Speak to us about an employment mortgage today on 1300 886 115 or enquire online to find a lender that will approve your loan.