When most Australians think about salary sacrificing, they think about tax savings. Super contributions. Novated leases. Fringe benefits….
But from a lending perspective, salary sacrificing can do much more than reduce tax — it can materially change how much you’re able to borrow. And if you work for a not‑for‑profit (NFP) or charity, the impact can be even greater. With the increase in property prices in Perth and the anticipation of rate increases (which will lower borrowing capacity) it’e worth checking to see if you qualify.
At Fox Mortgages, we regularly help clients unlock additional borrowing power simply by ensuring their income is assessed correctly — not creatively, not aggressively, just accurately.
Here’s how it works.
What Is Salary Sacrificing?
Salary sacrificing is an arrangement where part of your income is redirected before tax to an approved benefit, such as:
- Superannuation
- Novated car leases
- Living expenses
- Mortgage or rent repayments (NFP employees)
The key thing to understand is this:
Lenders don’t assess tax returns — they assess usable income and commitments.
And depending on what you’re sacrificing and who you work for, that usable income can be higher than it first appears.
How Lenders Really Look at Salary Sacrifice
Australian lenders assess applications using three main components:
- Gross income
- Ongoing commitments
- Net surplus income after expenses
Salary sacrificing can sit in any of these categories depending on the structure.
✅ Sometimes it’s added back as income
❌ Sometimes it’s treated as a liability
⚖️ Sometimes it’s partially recognised
This is why two people on identical salaries can receive very different borrowing outcomes.
Salary Sacrificing Into Super — Often Borrower Friendly
If you’re voluntarily salary sacrificing into superannuation, many lenders will:
- Use your pre‑sacrifice gross income
- May ignore the voluntary contribution
- Assess repayments off the higher income figure
Why? Because voluntary super contributions can be considered:
- Discretionary
- Reversible
- Not a household expense
✅ Result: improved serviceability without changing real‑world cash flow.
Where It Goes Wrong: Novated Leases
Salary sacrificing for a vehicle is a different story.
Most lenders will:
- Treat novated leases as an ongoing commitment
- Reduce borrowing capacity accordingly
- Stress‑test the full liability
Even though the payments are pre‑tax, from a lending perspective it’s still a debt.
In Perth, we can routinely see novated leases reduce borrowing capacity by $80,000–$150,000.
The Big Advantage: Not‑For‑Profit Salary Packaging
Now, this is where Not For Profit and charity employees have a genuine edge.
If you work for an eligible:
- Charity
- Community service organisation
- Hospital or health service
- Registered not‑for‑profit
…you may be able to salary sacrifice income toward:
✅ Mortgage repayments
✅ Rent
Because of FBT concessions, this income is effectively tax‑free (up to legislated caps).
For most NFP employees:
- Up to $15,900 per year
- Public hospitals & health: $9,010 per year
Why This Is Different From “Normal” Salary Sacrifice?
NFP mortgage and rent packaging isn’t a fringe benefit in the usual sense.
It:
- Replaces take‑home pay
- Directly services housing costs
- Improves net income
- Is ongoing and legislated
And crucially — when assessed correctly — lenders can treat this as effective income, not an expense.
How the Right Lender Assesses NFP Income
NFP‑friendly lenders will:
✅ Combine base salary plus packaged amount
✅ Apply tax‑free income treatment
✅ Avoid double‑counting mortgage or rent expenses
✅ Assess a higher net surplus position
Less experienced lenders may: ❌ Use post‑packaging income only
❌ Ignore the tax benefit
❌ Overstate living expenses
❌ Reduce borrowing power unnecessarily
Same income. Very different results.
Real‑World Example
Salary packaging employee purchasing (general information, based on a 30 year loan term)
- Base salary: $100,000
- Salary packaged to mortgage: $15,900
- Salary packaged to mortgage: $9,010
Borrowing capacity increase:
- Increase to borrowing capacity ($15,900): ~$60,000
- Increase to borrowing capacity ($9,010): ~$40,000
✅ No additional risk
✅ No extra debt
✅ Just correct assessment of tax‑free income
What Lenders Usually Need
To correctly assess NFP salary packaging, you’ll typically need:
- Recent payslips
- Salary packaging statement
- Employment confirmation
- Occasionally an employer letter
This is normal — when presented properly.
Common Mistakes We See
🚫 Applying online without explaining salary packaging
🚫 Using calculators that ignore tax‑free income
🚫 Changing packaging structures mid‑application
🚫 Assuming all lenders assess NFP income equally
These errors don’t just cause delays — they can cost you borrowing power.
Fox Mortgages’ Perspective
Salary sacrificing can be a powerful tool — but it should never be considered separately from your lending strategy.
This is especially true for:
- Not‑for‑profit employees
- Charity and healthcare workers
- Dual‑income households with complex pay structures
When structured and presented correctly, salary sacrificing:
✅ Improves serviceability
✅ Reduces stress‑test pressure
✅ Increases borrowing capacity legitimately
Final Word
Salary sacrificing isn’t just about paying less tax.
For the right borrower — especially NFP employees — it can be the difference between:
- Renting longer
- Settling for less
- Or buying the right property with confidence
If you’re salary sacrificing (or considering it) and planning to buy or refinance, you can book a free appointment to run through your options.
📍 Perth‑based
🏡 Specialists in complex income
📞 Clear advice that understands your payslip
Fox Mortgages — because how your income is assessed matters as much as how much you earn.
Salary sacrificing has a tax impact and we recommend that you always seek financial advice to consider the impact to you.