Employees can always work something out with their employers to lower their taxable salary and make life a lot easier. Salary sacrifice is one of them. The good news here is that it does not only lower your taxable income, it will also help you afford a house, specifically through the help of a salary sacrifice mortgage.
Salary sacrifice is an arrangement between employers and workers wherein they both agree to package the salary of the employee and replace a certain part of the income with fringe benefits that may not be taxable.
Employees prefer this payment scheme so they will be able to reduce the amount of tax that will be deducted from their salary.
What happens here is employees will not receive their salary in full. Instead of getting the whole amount, they will get only part of the salary and other items like electronic gadgets (cellphones, laptop, etc.) and in some cases car leases.
Why package your salary?
Some people, on first glance, may think that salary sacrifice is not going to be beneficial. Based on the term itself, sacrificing your salary may not be the most practical thing to do because that would mean you’d receive a smaller wage.
That may be so, but salary packaging can give you several benefits. This is why a lot of people are choosing to forego a part of their wages. They know that they are going to get something that is going to benefit them in the long run.
A simple answer to this question is employees stand to get something that has more value in the future with less contribution.
What are the benefits of salary packaging?
Salary sacrifice or packaging can be beneficial to any person simply because it helps lower taxable income. This can also help someone stash more money, say a retirement fund, for the future.
There are two main benefits to salary packaging: fringe benefits and superannuation.
Fringe benefits are payments made to an employee that can be anywhere from services to privileges. For example, an employee can get a car that can be used for private purposes. Employers can also provide assistance by paying off any expense employees incur like tuition fees, medical costs, or getting a home loan.
What can salary packaging do to help you take out a mortgage?
Salary sacrifice can be applied when taking out a mortgage. A salary sacrifice mortgage is always a possibility for employees who want to have their own home. Instead of getting an electronic gadget or a car, you can choose to package your home loan. This can also help you reduce your tax bill. Your employer will pay for the loan. It’s that simple.
Challenges people with packaged salaries encounter
There are some people who find it a little difficult to get approved for a mortgage because they have packaged salaries. Some lenders refuse to approve loan applications because they do not think that the borrower has the ability to pay off the loan.
There is one thing you need to know: you should not find it hard to borrow money just because you have a packaged salary.
You can find lenders who will gladly award you a loan even with this payment plan.
How do you take advantage of a salary sacrifice mortgage?
For you to take out a loan with a packaged repayment, you need to start with your employer. Talk to your human resources department and find out if you can qualify for a salary sacrifice mortgage. They will tell you if there are potential problems due to the expenses you have already packaged.
It would also help if you seek out a mortgage broker. Mortgage brokers know this stuff. Their experience, skills, and knowledge will be advantageous for you. Whatever your situation is, a mortgage broker will always help you find a way to enjoy the benefits of packaging your mortgage repayments.