Salary Packaging - Mortgage Repayments

Discussion in 'Accounting & Tax' started by Owlet, 5th Feb, 2018.

Join Australia's most dynamic and respected property investment community
  1. Owlet

    Owlet Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    757
    Location:
    VIC
    My employer has recently provided us with some salary packaging options. A novated lease does not suit us nor does a meals and accommodation card. The mortgage repayments may be a viable option.The yearly savings less the company's annual fees is circa $600-1000. Not a huge amount but a saving nonetheless.
    Does anyone have experience with this type of packaging? Pros / Cons etc. How could/does this affect borrowing power etc.
     
  2. Ross Forrester

    Ross Forrester Well-Known Member

    Joined:
    30th Oct, 2016
    Posts:
    2,085
    Location:
    Perth, Western Australia
    It varies from HR department to HR department. I have seen great ones and ones that basically just through the tax advisory to the wind.

    The tax professionals for the (good) employers will often give advice that covers the employee. Otherwise the employer HR department is dealing with 100’s of questions from outside accountants.

    In theory it should work. You are best placed to ask co-workers.
     
  3. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,130
    Location:
    03 9877 3000
    Unless you work for a not for profit organisation (public health, charity, religious org, etc), most salary packaging has an adverse effect on your borrowing power.

    I can't stress this enough, a noveated lease for a car is disastrous for your borrowing capacity.

    Meals and accommodation arrangements however can improve things. Most lenders recognise that this income is tax free and take that benefit into account.
     
    JacM likes this.
  4. Owlet

    Owlet Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    757
    Location:
    VIC
    A lot of my co-workers are not financially savvy hence my asking here. They have no interest in buying IPs and they see reducing payable tax as their goal. Even one who has one IP (former PPOR)told me they were going to put new carpet in the house because their accountant told them they were going to be positively geared this year so they had to do something to keep the property negatively geared for the tax saving.
     
  5. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    Salary sacrifice means exactly that.
    - You will lose income to pay for an off salary benefit. Often this is subject to FBT which gets passed onto the employee making it less attractive overall except as Peter said some employer have favourable schemes eg hospitals etc.

    Depends what the impact is but it then affects borrowing capacity.

    Worst of the lot has to be novated lease cars. Your income falls AND the debt and its servicing heavily affects borrowing. For something you will never own but pay a lot for.

    $1K benefit over mortgage payment seems low ?? Worth getting personal advice on this issue since employers insist you get advice.

    Buying a cashflow neutral property may also cost you $1k a year but provide a tax benefit too. And get capital appreciation as well
     
  6. jrc

    jrc Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    260
    Location:
    Regional NSW
    It's not a great deal for an employee of an fbt rebateable employer. You would also need to consider that if you are salary sacricing to a mortgage there should be no redraw facility unless the practice has been changed.

    I work for a rebateable employer and
    i would benefit a few hundred a year salary sacricing to a mortgage
     
  7. Ed Barton

    Ed Barton Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,229
    Location:
    Brisbane
    It will affect HECS repayments, child maintenance and handouts from centrelink.