Can I salary sacrifice my mortgage? How it affects your take-home pay

Can I salary sacrifice my mortgage? Understanding the impact on your take-home pay

When you’re comparing a job offer, the number that matters most is the amount that lands in your bank account after tax and the Medicare levy. Salary sacrificing your mortgage is one way to reduce your taxable income, but it’s not as straightforward as it sounds. This guide explains how it works, what the Australian Taxation Office says, and how to judge whether it boosts your net pay.

What is salary sacrificing a mortgage?

Salary sacrificing (also called salary packaging) is an arrangement where you agree to receive less before-tax salary in exchange for your employer paying for certain benefits. If your employer agrees, they can make repayments directly into your home loan account. The ATO confirms this is an effective expense payment fringe benefit, provided the arrangement is set up before you earn the salary and you have no access to the sacrificed amount .

Because the mortgage repayment is a fringe benefit, your employer must pay fringe benefits tax (FBT) on the value. The FBT rate is based on the highest marginal income tax rate plus Medicare levy, so it can be costly. Many employers ask you to make an employee contribution (from your after-tax pay) to reduce the FBT they have to pay. The ATO’s salary sacrificing page shows how employee contributions can improve your net disposable income .

How does it affect your take-home pay?

Your take-home pay is your salary minus income tax and the Medicare levy. When you salary sacrifice, your taxable income drops, so you pay less tax. But the FBT your employer pays is a cost to them, and they may pass some of it back to you via an employee contribution. The net effect on your bank account depends on your marginal tax rate, the amount sacrificed, and whether your employer requires a contribution.

For example, the ATO illustrates with a car salary sacrifice: an employee earning $65,000 who sacrifices $17,353 for a car ends up with a net disposable income of $41,611.96 – slightly less than the $41,912.00 without packaging. But if the employee makes a $7,000 contribution, net disposable income rises to $43,593.40. The same principle applies to mortgage sacrifice, though the FBT calculation differs because mortgage payments are an expense payment fringe benefit.

Key things to consider when comparing a job offer

• Your tax bracket: The higher your marginal rate, the more tax you save by reducing taxable income. The 2026–27 tax rates start at nil up to $18,200, then 15c per dollar up to $45,000, 30c up to $135,000, 37c up to $190,000, and 45c above that. The Medicare levy adds 2% for most full-time earners (the single-person thresholds are $28,011 and $35,013 – above $35,013 you pay the full 2%).
• FBT liability: Your employer will calculate FBT on the grossed-up value of the mortgage payment. They may ask you to contribute from after-tax pay to offset it. Ask for a clear breakdown of any employee contribution required.
• Reportable fringe benefits: The amount will appear on your income statement and may affect your Medicare levy surcharge, HELP/HECS repayments, and family tax benefits.
• Super guarantee: Your employer must still pay the 12% super guarantee on your original salary (not the sacrificed amount). Salary sacrificed super contributions are separate and count towards your concessional cap of $32,500 for 2026–27.

Is it worth it?

Salary packaging is usually more effective for middle to high incomes because the tax saved is larger. notes that you should get professional tax advice to work out if it’s right for you . The benefit also depends on what your employer offers – not all employers allow mortgage sacrifice.

When you’re comparing a job offer, ask the employer:

• Do you offer salary packaging for mortgage repayments?
• What employee contribution, if any, would be required?
• Can you show me an estimate of my take-home pay with and without the arrangement?

Then use our Take-home pay calculator to compare the net amounts. Remember that the sacrificed amount is not taxed as income, but the FBT cost may reduce the overall gain.

Bottom line

Yes, you can salary sacrifice your mortgage, but the impact on your bank account varies. The key is to model the numbers with your specific salary, mortgage amount, and employer’s FBT policy. For a deeper look at how salary packaging works, see our Salary packaging guide. And always check the latest ATO rulings – the rules around work-related items change from 1 April 2027, but mortgage payments are not affected by that change.