Can you salary sacrifice your mortgage? The short answer is no, but here’s what you can do

Can you salary sacrifice your mortgage?

If you’re looking for ways to reduce your tax bill and pay off your home loan faster, you might have wondered: can you salary sacrifice your mortgage? The short answer is no—not in the usual sense. Salary sacrifice in Australia is a pre-tax arrangement where you give up part of your salary in exchange for a benefit from your employer. Mortgage payments are a personal expense, not a work-related benefit, so they don’t qualify under standard rules. However, there are other strategies that can help you achieve a similar outcome.

What is salary sacrifice?

Salary sacrifice (also called salary packaging) is an agreement between you and your employer. You choose to receive less gross pay in return for a non-cash benefit. The benefit is often provided by the employer, and the cost is deducted from your pre-tax salary. Common examples include:

• Superannuation contributions – extra contributions above the mandatory Super Guarantee (12% from 1 July 2026).
• Car leases – novated leases for a vehicle.
• Electronic devices – laptops, tablets, or phones used for work.
• Childcare – some employers offer salary packaging for childcare fees.

Because the benefit is paid with pre-tax dollars, you pay less income tax. But the benefit itself may be subject to Fringe Benefits Tax (FBT), which the employer usually pays. The ATO sets strict rules on what counts as a fringe benefit.

Why can’t you salary sacrifice a mortgage?

Mortgage repayments are a personal liability. They are not a benefit provided by your employer, nor are they related to your work. The ATO does not allow salary sacrifice for personal living expenses. If your employer were to pay your mortgage directly, that would be considered a fringe benefit, and the employer would have to pay FBT on the amount. In practice, very few employers offer such an arrangement because the FBT cost is high and the administrative burden is significant.

Some salary packaging providers advertise “mortgage sacrifice” programs, but these are not true salary sacrifice. They usually involve redirecting your after-tax salary into a mortgage offset account or using a home loan linked to a salary packaging account. The tax benefit is minimal or non-existent. Always read the fine print and consult a tax adviser.

What are the alternatives?

If you want to use salary sacrifice to help with your mortgage, the most effective method is to boost your superannuation. Here’s how it works:

• You salary sacrifice a portion of your pre-tax salary into your super fund.
• That money is taxed at 15% (instead of your marginal rate, which could be 30%, 37%, or 45%).
• Your taxable income drops, so you pay less tax overall.
• Over time, your super balance grows, and you can use it to pay off your mortgage after retirement (or through a transition-to-retirement strategy).

For example, if you earn $120,000 a year and salary sacrifice $10,000 into super, your taxable income falls to $110,000. You save $3,000 in tax (assuming the 30% bracket). That extra cash can go straight into your mortgage offset account.

Another option is to use a novated lease for a car. By sacrificing part of your salary for car payments (including fuel, insurance, and maintenance), you reduce your taxable income. The savings can be redirected to your mortgage. However, this only works if you need a car and your employer offers novated leasing.

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