Can you salary sacrifice your mortgage? How to compare job offers using take-home pay
Pay varies by employer and arrangement; there is no single figure for mortgage salary sacrifice benefits.
Can you salary sacrifice your mortgage? How to compare job offers using take-home pay
When you’re weighing up a job offer, the headline salary can be misleading. What really matters is the amount that lands in your bank account after tax, the Medicare levy, and any salary sacrifice arrangements. One popular option is to salary sacrifice your mortgage – but how does it work, and how do you compare offers fairly?
What is salary sacrifice?
Salary sacrifice (also called salary packaging) is an arrangement where you and your employer agree to swap part of your pre-tax salary for a benefit of similar value. Common benefits include cars, super contributions, and – yes – mortgage repayments. The key advantage is that the sacrificed amount is not included in your taxable income, so you pay less income tax and Medicare levy. Salary packaging can be a smart way to boost your take-home pay, but it’s not always straightforward.
Can you salary sacrifice your mortgage?
Yes, you can. The Australian Taxation Office has ruled that a salary sacrifice arrangement where your employer repays your home loan (with or without a redraw facility) is effective for tax purposes, provided it meets the conditions in Taxation Ruling TR 2001/10. The ATO explains that the arrangement is treated as an expense payment fringe benefit under section 20 of the Fringe Benefits Tax Assessment Act 1986. This means your employer pays the benefit, and you receive a lower salary – but your employer may have to pay fringe benefits tax (FBT) on the value of the benefit.
Because FBT is calculated at the highest marginal tax rate (including the Medicare levy), employers often limit which benefits they offer or pass on the FBT cost to you. That’s why it’s essential to check the fine print of any salary sacrifice offer.
How mortgage salary sacrifice affects your take-home pay
Let’s look at an example. Suppose you earn $100,000 a year and your employer offers to salary sacrifice $15,000 into your mortgage. Your taxable income drops to $85,000. Using the 2026–27 tax rates from the ATO, your income tax (excluding Medicare) would be:
- $0 on the first $18,200
- 15c per $1 from $18,201 to $45,000 = $4,020
- 30c per $1 from $45,001 to $85,000 = $12,000
- Total tax = $16,020
Plus the Medicare levy of 2% on $85,000 = $1,700. Total deductions = $17,720. Your take-home pay would be $85,000 – $17,720 = $67,280. Without salary sacrifice, on $100,000 you’d pay tax of $4,020 + 30c on $55,000 = $16,500, plus Medicare $2,000 = $18,500, take-home $81,500. But you’d also have to pay your mortgage from after-tax money. With salary sacrifice, your employer pays $15,000 directly to your mortgage, so you effectively get that amount tax-free. Your net position improves by the tax saved.
However, if your employer passes on the FBT cost, the benefit may be reduced. Always ask for a breakdown of the total package.
Comparing job offers: what to look for
When comparing offers, don’t just look at the base salary. Consider:
- Total remuneration value: Include salary sacrifice benefits, super (the super guarantee is 12% from 1 July 2026), and any other perks.
- Take-home pay estimate: Use a take-home pay calculator that accounts for salary sacrifice and the Medicare levy. Remember the Medicare levy is 2% for most people, but if your income is below $28,011 (single) you pay none, and between $28,011 and $35,013 you pay a reduced rate.
- FBT implications: Ask if the employer pays the FBT or if it’s deducted from your package.
- Flexibility: Can you change the amount sacrificed each year? Is the arrangement ongoing?
The bottom line
Salary sacrificing your mortgage can be a tax-effective way to reduce your taxable income and increase your take-home pay, but it depends on your employer’s policy and whether they absorb the FBT. When comparing job offers, always convert everything into the amount that reaches your bank account after tax and the Medicare levy. That’s the number that matters.
For more guidance, see our Salary packaging guide and the Tax and Medicare page. You can also check the Minimum wage benchmarks to see how offers stack up against the national minimum.
Questions
Can I salary sacrifice my mortgage repayments?
Yes, you can salary sacrifice your mortgage repayments if your employer offers it. The Australian Taxation Office has confirmed that a salary sacrifice arrangement where your employer repays your home loan (with or without a redraw facility) is effective for tax purposes, provided it meets the rules in Taxation Ruling TR 2001/10. The benefit is treated as an expense payment fringe benefit, so your employer may have to pay fringe benefits tax.
How does salary sacrificing my mortgage affect my take-home pay?
When you salary sacrifice part of your salary into your mortgage, your taxable income is reduced by that amount. For example, if you earn $100,000 and sacrifice $15,000 into your mortgage, your taxable income becomes $85,000. You pay less income tax and Medicare levy, so your take-home pay increases. However, your employer may pass on the cost of fringe benefits tax, which could reduce the net benefit.
What should I consider when comparing job offers with mortgage salary sacrifice?
Compare the total remuneration package, not just the base salary. Look at the value of the salary sacrifice benefit, any fringe benefits tax your employer pays, and how it affects your take-home pay. Use a salary packaging calculator to estimate your after-tax income. Also check if the arrangement is ongoing or limited, and whether you can change the amount sacrificed.