Salary Sacrifice Mortgage: Who Can Do It and How Much You Save
Can you salary sacrifice your mortgage in Australia? Most people can't, but hospital and charity workers can save thousands. Here's exactly how it works.
By Timothy Hirou GaschereauPublished 10 min read
Salary sacrificing your mortgage sounds like a dream: pay your home loan with pre-tax dollars, drop your taxable income, and keep more of what you earn. Who would say no?
The catch is that for most Australians it simply does not work. The tax system shuts it down for ordinary employees. But for one specific group of workers, it is one of the best perks going, and many of them are not using it fully. Here is exactly who can do it, the caps, the real saving, and the trap to watch. General information only, not advice.
🎯 The essential: You generally cannot salary sacrifice your mortgage at a normal for-profit employer: FBT at 47% wipes out the benefit. You CAN if you work for an FBT-exempt employer (public hospitals, ambulance services, and charities/PBIs). Hospital staff can package roughly $15,900 a year of living expenses including mortgage repayments; PBI/charity staff roughly $9,010. The saving is real (thousands a year), but the packaged amount shows as a reportable benefit that can reduce means-tested payments like Child Care Subsidy.
The big catch: most people cannot do this
If you work for a standard for-profit private employer, stop here. When an employer pays a personal expense like your mortgage, it is a fringe benefit, and for most employers fringe benefits attract Fringe Benefits Tax at 47%. That more than wipes out any income tax saving, so no sensible employer will do it without passing the cost back to you.
This was never a loophole for private sector workers. The system was designed this way. If you have seen posts claiming you can salary sacrifice your mortgage, check whether they are talking about FBT-exempt employers, because that is a completely different situation. For the general rules, see our salary packaging guide.
Who CAN salary sacrifice their mortgage
The key is working for an employer exempt from FBT. They can pay your mortgage from pre-tax salary without triggering the 47% bill that kills the benefit for everyone else. That means:
- Public hospitals and most state/territory public health services
- Public ambulance services
- Registered health promotion charities (HPCs)
- Public benevolent institutions (PBIs): many charities, disability and aged care providers, and community services
If you work in nursing, allied health, social work, disability support, aged care or community services, there is a good chance your employer qualifies. Not sure? Ask HR or payroll. (Some non-profits are FBT-rebatable rather than fully exempt, so the benefit is smaller; this guide focuses on fully exempt employers.)
How the FBT-exempt caps work
Exempt employers can provide benefits FBT-free only up to a cap, expressed as a grossed-up value (the actual benefit times 1.8868 for these living-expense benefits). The commonly quoted net amounts are what you can actually package:
| Employer type | Grossed-up cap | Net amount you can package |
|---|---|---|
| PBIs and health promotion charities | ~$17,000 | ~$9,010 / year |
| Public hospitals and ambulance | ~$30,000 | ~$15,900 / year |
Mortgage repayments on your own home are one of the most popular uses of this cap: your employer's packaging provider pays that amount straight to your lender from pre-tax salary. Just remember the cap is shared across everything you package, so a car or school fees eat into the same limit.
How it works in practice
The mechanics, once you know the steps:
- Confirm your employer is eligible (HR or your contract).
- Contact the salary packaging provider your employer uses.
- Nominate your mortgage repayments up to the cap, with your loan details.
- Your pre-tax salary is redirected to your lender each pay cycle.
- Your taxable income drops, so you pay less income tax.
- An RFBA appears at year end on your income statement (see below).
Providers charge an admin fee, typically $100 to $300 a year. At the savings on offer, it is almost always worth it, but factor it in.
Worked example: the real tax saving
Priya is a registered nurse earning $90,000 at a public hospital in 2025-26. She is eligible to package up to $15,900 of living expenses and directs the full amount to her mortgage.
| No packaging | Packaging $15,900 | |
|---|---|---|
| Taxable income | $90,000 | $74,100 |
| Income tax | $20,797 | $15,709 |
| Medicare levy | $1,800 | $1,482 |
| Total tax | $22,597 | $17,191 |
| Annual saving | - | ~$5,400 |
Priya is not getting extra money. Her mortgage still gets paid. She is simply paying $15,900 of it with pre-tax dollars instead of post-tax dollars, and pocketing the tax difference, about $450 a month, which compounds over the life of the loan. Pair this with our tips on paying off your mortgage faster.
The reportable benefit catch you need to know
The packaged amount does not vanish. At year end, the grossed-up value shows on your income statement as a Reportable Fringe Benefits Amount (RFBA). Packaging $15,900 creates an RFBA of roughly $30,000. It does not increase your income tax, but it is counted in your adjusted taxable income for means-testing:
- Child Care Subsidy and Family Tax Benefit
- HECS/HELP repayment thresholds
- The Medicare levy surcharge and private health insurance rebate
- Division 293 and some Centrelink payments
For families receiving Child Care Subsidy, the reduction can partly or fully offset the tax saving. This is the single most important thing to model first. A good packaging provider will give you a net-benefit comparison, so ask for one if you receive any means-tested payments.
Is it worth it, and the extras
On top of the main cap, exempt employees also get a separate meal entertainment cap (roughly $2,650 grossed-up) for restaurant meals and functions, plus the option to package items like a novated car lease under different rules.
Worth it if you work for an FBT-exempt employer, have a mortgage, sit in the 30%+ bracket, and have checked the RFBA impact on any means-tested payments. Think carefully if you receive Child Care Subsidy or Family Tax Benefit. Not available if you work for a for-profit private employer.
Frequently asked questions
Can I salary sacrifice my mortgage if I work in the private sector?
No. If your employer is a standard for-profit business, paying your personal expenses (including mortgage repayments) is a fringe benefit subject to FBT at 47%, which wipes out the income tax saving entirely. Salary sacrificing a mortgage only works for employees of FBT-exempt employers like public hospitals, public ambulance services and registered charities.
How much can I salary sacrifice for my mortgage?
It depends on your employer type. Public hospital and ambulance workers can typically package around $15,900 per year of living expenses (including mortgage repayments). Public benevolent institution and health promotion charity workers can package around $9,010. These caps cover all salary-packaged living expenses combined, not just your mortgage.
Does salary sacrificing my mortgage reduce my taxable income?
Yes. The amount you package (up to the cap) comes from your pre-tax salary, reducing your taxable income by that amount. You pay income tax on the lower figure. However, the grossed-up value appears on your income statement as a Reportable Fringe Benefits Amount, which counts towards adjusted taxable income for means-testing.
What is a Reportable Fringe Benefits Amount and does it affect my tax?
The RFBA is the grossed-up value of your packaged benefits, shown on your income statement at year end. It does not directly increase your income tax, but it is included in adjusted taxable income used to means-test payments like Child Care Subsidy, Family Tax Benefit, HECS/HELP repayments and the private health insurance rebate. It can reduce those payments and partly offset your saving.
Can I salary sacrifice my mortgage and a car at the same time?
You can package both, but the living-expenses cap and a novated car lease are subject to different rules, and the lease sits outside the living-expenses cap with its own FBT treatment. Ask your packaging provider how they interact in your specific case before committing.
Do I need to use a salary packaging provider?
In practice, yes. Most FBT-exempt employers use a third-party administrator to manage compliance, payments and reporting, and they charge a modest annual fee (roughly $100 to $300). Your employer will direct you to their approved provider.
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Sources
This article is general information only, not financial or tax advice. FBT caps, tax rates and means-test rules can change, and eligibility depends on your employer. Check the ATO, your salary packaging provider or a registered tax agent before acting.
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General information only. This article is educational and does not constitute personal financial advice. It does not account for your circumstances. Consider your own situation and seek advice from a licensed adviser before acting. Read our full disclaimer.
Timothy Hirou Gaschereau
Founder of Snowball Invest, not a financial adviser.
I write about what I'm learning myself, because nobody ever taught us how to take control of our own money. It's a skill, not a mystery, and it's never too late to learn it. The best day to start was yesterday, the second best is today.
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