Impact of salary sacrificing on serviceability?

I'm curious as to the impact of salary sacrificing on serviceability?

Currently, my partner salary sacrifices and I just interviewed for a job that allows salary sacrificing up to $30k apparently. I worked this out roughly and it's the equivalent to a $10k gross pay rise. However, on paper I get paid less. Plus my partner is already doing this.

Will that banks look at salary sacrificing favorably, negatively or indifferently?

 

Depends on the nature of the salary sacrificing.

If it's in public health or a charitable organisation, you can salary sacrifice towards living expenses. Banks look on this favourably, the recognise the tax free nature of the income.

If it's for the purposes of a novated lease, it's a disaster.

Sometimes it's complicated and even though it might be favourable, I've had assessors simply go the other way and look at it negatively.

 

Negatively. I had a Novated Lease. I paid it out 18 months early so that I could fix up serviceability for another IP purchase.

 

I agree with Peter - as a general rule if it's for a car it's very bad, if it's for anything else that's easily stoppable it's neutral to good.

Maybe have a chat to your broker regarding the specifics.

 

Not car. Some expenses and mortgage payments would be sacrificed. Amusingly both my partner and I would end up being employed by the Pope.

 

Do you work for a charity/hospital/non profit? The salary sacrifice there is different to normal workplaces.
As the others have said, this kind of salary sacrifice should increase your capacity because charities are given exemptions from fringe benefit tax to attract better employees without outlawing more money. But not all assessors/credits policy understand this and a lot of the time it means your serviceability isn't any better that if you salary sacrificed a car with a normal employer.

 

Yes, my partner currently works for at a catholic hospital and if I am offered and accept this position we would both work for Catholic organisations.

So that looks good then

 

Meh, it used to be better.

Your take home pay, grossed up, is better than the gross pay on your payslip/group cert.
This makes most mortgage brokers and assessors head spin, and they take the most conservative figure.

Plus they usually want at least a letter from the salary sacrifice company and your employer specifically saying you can cease at any time.

When it ceases, it loses the tax break (fringe benifits tax exemption) and they use the lower figure. Shame because they specifically include mortgage payments as eligible for salary sacrifice.

 

In my experience with these types of deductions they will at worst treat it as normal taxable income. At best, they'll allow it as tax free but it does depend. ANZ have been good at this in the past.

 

Piece of cake, and yes, it's good cake.

 

Hi @Jess Peletier and @Peter_Tersteeg , would it be a bad idea to salary sacrifice prior to settlement of a property? I've sold some shares this financial year to purchase property and expect to get a large tax bill, so I'm contemplated to max out the concessional contribution to save some tax and also beef up my tiny super balance. Thanks!

 

@Ouchmyknees it depends on the nature of the salary sacrifice.

A one off super contribution (or ongoing) isn't a problem as it's voluntary and can be cancelled. It's a problem when you can't cancel it at your discretion, such as a lease.

 

The lenders basic rule of thumb is simple - if it can be cancelled they can pretend it doesn't exist and you're earning your normal gross amount.

If it is a car related lease - then they assume it cannot be cancelled and so the lower figure is used for income.

On the other side of the coin - if you salary sacrifice within a specified industry/workplace which allows you to cover living expenses, mortgage repayment (Maxxia, other salary sacrifice organisations) - then this actually increases your effective income which lenders will count - as your net income received is greater than the original gross figure.