![]() ![]() Making payments from your pre-tax income may give you the opportunity to put more money towards your mortgage, with the potential benefit of reducing interest payments over the life of the loan and paying off the mortgage earlier than expected. If you work for an employer who is FBT-exempt or FBT-rebatable, there generally will be tax savings, as pre-tax income is paid directly to your lender, reducing your taxable income. The arrangement must be negotiated before you have earned the amount as salary or wages – a salary sacrifice cannot be redirected after the employee already has the entitlement to receive the salary for the period.Ĭompare Super Funds What you need to know ![]() The mortgage payment will be deducted from your pre-tax salary and paid directly to your lender. Once in place, you’ll have no access to the sacrificed salary amount for the term of the agreement. This sets out the terms of the salary sacrifice, the amount, and the details of the nominated lender to whom the mortgage payment will be made. If your employer agrees to salary sacrifice your mortgage payments, the arrangement should be formally agreed in writing. It’s important to do your sums to consider whether salary sacrificing mortgage payments will provide you with a positive cash advantage. Employee of an FBT-exempt employer with a salary packaging cap of $30,000 ← Mobile/tablet users, scroll sideways to view full table →Įach organisation will have its own policy about salary sacrificing so you’ll need to check with your HR or payroll department to see if it’s an option for you. The grossed-up mortgage payments are less than the $30,000 limit. Their employer agrees to mortgage payments amounting to $15,899 per year. Let’s look at three different scenarios for an employee with a base salary of $100,000 per year. These types of employers are entitled to a rebate of 47% of the FBT payable, limited to benefits with a grossed-up taxable value of $30,000 for each employee, which is the cost-effective cap limit.įor other employers, unless the employee is subject to the top marginal income tax rate, there is likely to be a financial disadvantage in salary sacrificing mortgage payments. Rebatable employers include certain not-for-profit organisations, some registered charities, certain educational institutions, trade unions and employer associations. $30,000 for an employee of a health promotion charity or a non-hospital Public Benevolent Institution (PBI).$17,000 for an employee of a public hospital or public ambulance service or. ![]() If the employer is exempt from FBT or ‘FBT rebatable’, however, there can be a financial advantage in salary sacrificing mortgage payments.įBT-exempt employers can provide employees with benefits free of FBT, up to the following specified capped limits: This means that the taxable value of the mortgage payment does not attract any concessional valuation so the employer will have to pay FBT on the full amount. Generally, mortgage payments would be considered a fully taxable fringe benefit. This determines whether a salary sacrificing arrangement is cost-effective to both you and your employer. Your after-tax position will vary depending on the type of benefit provided and its FBT treatment. This is generally limited to certain hospitals, registered charities, and other not-for-profit organisations. Employers operating in certain sectors may be entitled to an FBT exemption or rebate and as a result can provide salary packaged benefits to employees much more cost effectively than other employers. Salary sacrificing and Fringe Benefits Taxīenefits may be subject to Fringe Benefits Tax (FBT), which is a tax that some employers pay for benefits paid to an employee (or their associate, such as a family member) in addition to their salary or wages.
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