Salary Sacrifice Mortgage: What It Means for Your Pay

What Is Salary Sacrifice Mortgage?

When you see "salary sacrifice mortgage" in a job ad, it means the employer offers a salary packaging arrangement that allows you to direct pre-tax salary towards your home loan. This is not a standard feature of most employment contracts. It is typically only available in certain sectors such as not-for-profit or public health, where employees can package mortgage payments as part of a salary packaging arrangement. The ATO caps the amount that can be sacrificed for living expenses under these arrangements.

How to Compare Job Offers with Salary Sacrifice Mortgage

When comparing offers, start by looking at the gross annual salary. The Salary Index helps you see where that figure sits against the national line. The national line (index 100) is $108,352 per year, based on full-time adult ordinary-time earnings from the Australian Bureau of Statistics. For example, a job offering $90,000 has an index of about 83.1, while $95,000 is about 87.7. These are gross benchmarks before any sacrifice.

If an offer includes salary sacrifice mortgage, you need to consider the after-tax effect. Salary sacrifice reduces your taxable income, so you pay less tax. But it also reduces your employer's super guarantee contribution, because super is calculated on your reduced ordinary-time earnings. The super guarantee is 12% from 1 July 2026, up to a maximum contribution base of $270,830. So a $10,000 sacrifice could reduce your super by $1,200.

Example: Two Offers

Offer A: $90,000 base with salary sacrifice mortgage option. Offer B: $95,000 base without sacrifice. Using the index, Offer A is 83.1 and Offer B is 87.7. But after sacrifice, Offer A's taxable income might be lower. Suppose you sacrifice $10,000 into mortgage. Your taxable income becomes $80,000. Using the 2026–27 tax rates (nil to $18,200, 15% to $45,000, 30% to $135,000), your tax on $80,000 is about $16,467 plus Medicare levy of $1,600, total $18,067. Take-home pay (before sacrifice) would be $80,000 minus $18,067 = $61,933. But you also have the $10,000 mortgage payment from pre-tax salary, so your net cash flow is $61,933 plus the $10,000 mortgage benefit (since you didn't pay tax on it) = $71,933. For Offer B at $95,000, tax on $95,000 is about $21,267 plus Medicare $1,900 = $23,167, take-home $71,833. So Offer A gives slightly more net cash flow ($71,933 vs $71,833), but your super is lower ($9,600 vs $11,400). The difference is small, and depends on your exact sacrifice amount and tax bracket.

Industry and State Context

The salary index varies by industry and state. For example, Professional, scientific and technical has an index of 114.7, while Retail trade is 75.9. If your job is in a high-index industry, the gross pay is likely higher, making sacrifice less beneficial. Similarly, states like WA (106.9) and ACT (109.9) have higher averages, while TAS (88.6) is lower. A salary sacrifice mortgage offer in a high-cost state might be more attractive.

Caveats and Considerations

Salary sacrifice mortgage is not available in all jobs. It is most common in not-for-profit, health, and some government roles. The ATO sets caps: for example, under a salary packaging arrangement, you can sacrifice up to $15,900 per FBT year for living expenses (including mortgage) if you work for a not-for-profit. For other employers, mortgage sacrifice is usually not allowed. Always check the offer details and consult a tax professional.

Also, salary sacrifice reduces your super guarantee, which affects your retirement savings. The how the index works page explains that the index uses gross ordinary-time earnings, not after-sacrifice amounts. So when comparing offers, use the gross salary for index comparison, but then adjust for sacrifice.

Final Thoughts on Comparing Offers

When reading a job ad mentions salary sacrifice mortgage, treat it as a potential benefit but not a guarantee. Use the topics page for more on salary packaging. The key is to compare the total remuneration package: base salary, super, and any sacrifice benefits. Use the salary index to benchmark the base, then calculate your net position. Remember that the national minimum wage is $52,255 (index 48.2), so any offer above that is above the floor. If you are unsure, ask the employer for a breakdown of the salary packaging arrangement.

In summary, salary sacrifice mortgage can be a useful tool to reduce tax, but it is not common. Always verify the details and consider the long-term impact on super. The salary index gives you a quick way to see where your gross pay sits against the national line, but the real value depends on your personal tax situation.