Author Topic: Salary packaging home loans and living expenses?  (Read 4364 times)

middo

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Salary packaging home loans and living expenses?
« on: August 08, 2019, 12:30:39 AM »
Australia - taxation specific question.

I have just been offered through my workplace the opportunity to salary package my mortgage (on owner occupied only) up to $15 900 per annum, and/or living expenses again up to $15 900 per annum.  These would obviously drop my taxable income and provide me with substantial savings each year.

But - are they legal?  Can I really pay for my mortgage before tax?  Or my gas bill as it states?  Is there some obvious catch I'm missing?

Has anyone done this?


mspym

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Re: Salary packaging home loans and living expenses?
« Reply #1 on: August 08, 2019, 03:04:31 AM »
Hi Middo - it seems like it's legit but echoice points out it may affect super contributions and has a couple of other things to look out for re setup costs etc. Gosh this country is weird

https://www.echoice.com.au/money/can-you-salary-sacrifice-mortgage/
https://www.finder.com.au/can-you-salary-sacrifice-your-mortgage
https://www.accesspay.com.au/employee/general-living-expenses/

middo

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Re: Salary packaging home loans and living expenses?
« Reply #2 on: August 08, 2019, 03:51:28 AM »
Thanks @mspym .  I will look further into it then.

And yes, why do we allow salary packaging of our mortgages? I dunno.  Seems bizarre to me.

mrcheese

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Re: Salary packaging home loans and living expenses?
« Reply #3 on: August 08, 2019, 04:59:15 AM »
The idea of salary packaging is to entice people to work in areas of public benevolence such as healthcare or not-for-profit institutions because these have a reputation as paying less than private industry. Where I work I'm able to salary package $9010 every year towards rent or mortgage payments.  Shaves a fair bit off PAYG tax but it does get grossed up to $17k for FBT purposes so check your maths to make sure it's going to be a benefit to your particular circumstances. E.g. If you've got a HECS-HELP debt this sort of packaging is not your friend.

marty998

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Re: Salary packaging home loans and living expenses?
« Reply #4 on: August 08, 2019, 03:14:41 PM »
The idea of salary packaging is to entice people to work in areas of public benevolence such as healthcare or not-for-profit institutions because these have a reputation as paying less than private industry. Where I work I'm able to salary package $9010 every year towards rent or mortgage payments.  Shaves a fair bit off PAYG tax but it does get grossed up to $17k for FBT purposes so check your maths to make sure it's going to be a benefit to your particular circumstances. E.g. If you've got a HECS-HELP debt this sort of packaging is not your friend.

May also tip you into medicare levy surcharge territory as well.

middo

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Re: Salary packaging home loans and living expenses?
« Reply #5 on: August 08, 2019, 04:55:25 PM »
Thanks for the things to think about.  Some basic details:

I earn around 100K per annum.  The mortgage I would sacrifice is around 10,300 per annum.  We have no HECS/HELP debt.  We have health insurance.  Currently I am not tipping in extra to super due to current cash needs (renovations to save the house from falling down the hill).  Under these circumstances it seems like a good idea to me, as it would give me around $3000 per year for no extra effort. 

I know, I'm not investing in the right order.  But I am also looking at saving where I can.  I have signed up for their seminar next week, but a sales pitch may not give me all the possible negatives, so if anyone else can see a negative, please let me know.

Thanks everyone.

LonerMatt

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Re: Salary packaging home loans and living expenses?
« Reply #6 on: August 08, 2019, 05:31:51 PM »
When I worked for a charity run school in Canberra I salary sacrificed my rent and it was effectively like a $15-20000 raise.

There's nothing dodgy or problematic about it and it's one of the few tools people earning less money have to get ahead.

middo

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Re: Salary packaging home loans and living expenses?
« Reply #7 on: August 08, 2019, 07:24:28 PM »
When I worked for a charity run school in Canberra I salary sacrificed my rent and it was effectively like a $15-20000 raise.

There's nothing dodgy or problematic about it and it's one of the few tools people earning less money have to get ahead.

Cheers Matt, thanks for the info.

deborah

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Re: Salary packaging home loans and living expenses?
« Reply #8 on: August 08, 2019, 08:24:24 PM »
Salary sacrifice of various bizarre things has been around for a while. The places I worked that offered it were really quite up front about the pros and cons of the various options in the sales pitch, because they didn’t want unhappy employees.

LonerMatt

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Re: Salary packaging home loans and living expenses?
« Reply #9 on: August 08, 2019, 08:29:22 PM »
IME it's often forgotten about but totally valuable. My current SS options are super lacklustre so no opportunity to use them, really.

Eucalyptus

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Re: Salary packaging home loans and living expenses?
« Reply #10 on: August 08, 2019, 08:30:52 PM »
I work in healthcare now and salary sacrafice my full mortgage.


Apart from HECS-HELP debts, some other things it affects include child support...that's a big one for lots of nurses (lots of single parents...). Many don't salary sacrafice if they have dependent children as pushes the flow of child support towards their ex. It does this for me, by quite a lot. Add on my HECS-HELP debt and instead of getting back about $3000 a year to me, a few hundred goes to my HECS debt, and about $2000 goes to my ex. I only get about $500 in direct benefit. However:
  • I am paying of my HECS Debt faster. That $500 would otherwise go into the general Income Tax coffers.
  • My child's other parent is $2000 better off, which benefits my child.
  • I'm still getting $500 more.

(Numbers aren't precise but rough, from my memory, when I did the calcs almost a year ago for the 2018-2019 financial year. All I cared about was that I wasn't somehow paying more child support than what I'd get back in tax).

MrThatsDifferent

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Re: Salary packaging home loans and living expenses?
« Reply #11 on: August 21, 2019, 11:54:37 PM »
I salary sacrifice my rent Because why the hell wouldn’t you if you can?

happy

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Re: Salary packaging home loans and living expenses?
« Reply #12 on: August 23, 2019, 10:33:29 PM »
I worked in the public health system and salary packaged for many years. I used to  package up my mortgage because it used up the total allocation allowed in one item, which was easier for me, and reduced admin costs slightly. My employer allowed you to package up bills like health insurance, school fees, utilities etc, but that was always more effort than just using up the full amount on the mortgage.




middo

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Re: Salary packaging home loans and living expenses?
« Reply #13 on: September 04, 2019, 05:52:16 PM »
I looked into it further, and came against an issue that I don't want to resolve.  The house we are living in has a loan on it that is an investment loan (as we had the mortgage when it was an investment).  If we tell the bank we are now living in it, then we could negotiate a lower rate for this loan as owner-occupier.  But - we have a larger home at a lower rate that is already owner occupier status with the bank, as we were living in it when we took out that loan.  Since the plan is still to move back there, it just seems like opening up a can of worms that isn't worth the few hundred dollars savings in tax.

But I might look instead at our living expenses being packaged.

Eucalyptus

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Re: Salary packaging home loans and living expenses?
« Reply #14 on: September 06, 2019, 12:56:24 PM »
Hey Middo. I have friends that salary package their living expenses (they are older and have paid off their houses)... seems to work quite well. Depending on your employer and the service provider they pick, generally speaking you'll get a debit card with the sacraficed amount put into it each fortnight. Pretty easy to use and keep track of. I'll do the same once my mortgage is paid off (likely over a decade away from that though).