Can I salary sacrifice my mortgage? No, but here’s how to reduce tax on housing costs

Can I salary sacrifice my mortgage?

No, you cannot salary sacrifice your mortgage in Australia. Mortgage repayments are a personal expense, and the Australian Tax Office (ATO) does not allow salary sacrifice for private living costs. This article explains why, and what you can do instead to reduce tax on housing costs using superannuation and other strategies.

What is salary sacrifice?

Salary sacrifice is an arrangement where you agree to give up part of your pre-tax salary in exchange for a benefit provided by your employer. Common examples include additional superannuation contributions, a car via novated lease, or electronic devices. The benefit is usually subject to fringe benefits tax (FBT) unless it is exempt. By reducing your taxable income, you pay less income tax, but the benefit must be for something that is otherwise deductible or exempt under tax law.

Why mortgage payments don’t qualify

The ATO treats mortgage repayments as a private expense, similar to rent, groceries, or utilities. These are not considered work-related benefits and cannot be salary sacrificed. If your employer offered to pay your mortgage as a salary sacrifice benefit, it would be a fringe benefit and likely subject to FBT at a high rate, making it impractical. The only way to get a tax benefit from your mortgage is if the property is investment-related (negative gearing) or if you use the First Home Super Saver Scheme (FHSSS).

How salary sacrifice into super can help with housing

While you cannot salary sacrifice your mortgage, you can salary sacrifice into superannuation. This reduces your taxable income and your overall tax bill. For example, if you earn $108,352 (the national full-time adult ordinary-time earnings, index 100) and salary sacrifice $10,000 into super, your taxable income drops to $98,352. At the 30% marginal tax rate (plus 2% Medicare levy), you save about $3,200 in tax. The super guarantee is 12% from 1 July 2026, but salary sacrifice contributions are in addition to the employer guarantee.

The First Home Super Saver Scheme (FHSSS)

The FHSSS allows you to make voluntary super contributions (including salary sacrifice) and later withdraw them to buy your first home. You can withdraw up to $50,000 of contributions (plus deemed earnings) from your super. This is a tax-effective way to save for a deposit because contributions are taxed at 15% inside super (instead of your marginal rate) and withdrawals are tax-free. For someone on $108,352, salary sacrificing $10,000 into super saves about $3,200 in tax, but the contribution is only $1,500 in super tax, so the net benefit is about $1,700 saved compared to after-tax saving. The FHSSS is a legitimate way to use salary sacrifice for housing, though not directly for mortgage repayments.

Tax brackets and take-home pay

For 2026–27, resident tax rates (excluding Medicare) are: nil up to $18,200; 15% from $18,201 to $45,000; 30% from $45,001 to $135,000; 37% from $135,001 to $190,000; and 45% above $190,000. Medicare levy is 2%. If you earn $108,352, your take-home pay (ignoring HELP, salary sacrifice, etc.) is roughly $82,000 after tax and Medicare. Salary sacrificing into super reduces that take-home but increases your super balance.

Other considerations: awards and super guarantee

Your employment may be covered by a modern award or enterprise agreement. Awards set minimum wages and conditions, but salary sacrifice is a separate agreement. The national minimum wage from 1 July 2026 is $26.44 per hour, index 48.2. Super guarantee is 12% on earnings up to $270,830. Salary sacrifice contributions count toward the concessional contributions cap ($30,000 per year for 2026–27, but check ATO updates). Exceeding the cap incurs additional tax.

Summary

You cannot salary sacrifice your mortgage because it is a private expense. However, you can use salary sacrifice into super to lower your tax and, through the FHSSS, save for a home deposit. For investment properties, negative gearing may apply. Always consult a tax professional for your situation.

For more on how pay compares nationally, see Salary Index. For industry-specific pay guides, visit pay guides. To understand how the index is calculated, read how the index works.