Many NFP employees have heard that “you can pay your mortgage pre tax” but are not sure what that actually means or whether it applies to them. Used correctly and within the rules, salary packaging can be a powerful tool in your home loan strategy.
Who can package mortgage?
Eligibility depends on your employer’s status and the salary packaging provider they use.
Many employees of:
- Public and private not for profit hospitals.
- Charities and public benevolent institutions (PBIs).
- Certain disability, aged care and community organisations.
can package mortgage payments as part of their “living expense” cap.
How it actually works in practice
Instead of paying your entire mortgage from your after-tax salary, your employer and packaging provider:
- Deduct an agreed amount from your pretax salary each pay.
- Use that amount to pay your mortgage directly or reimburse you according to their process.
Your taxable income is reduced by the packaged amount (within the cap), which can increase your effective take home pay.
Key rules and limits
Important points:
- There are annual caps on how much can be packaged as living expenses before extra tax costs kick in.
- Only certain types of housing payments may qualify, typically your principal place of residence, not investment properties.
- Salary packaging is a tax strategy, not a substitute for proper budgeting or risk management.
Pros and cons for your home loan strategy
Potential benefits:
- Improved monthly cash flow.
- Better ability to handle repayments comfortably.
Risks if misused:
- Over reliance on packaging caps, leaving no room for other living expenses.
- Confusion when dealing with lenders who don’t understand the structure.
How Iconic fits into this picture
Iconic Mortgage Solutions doesn’t provide tax advice, but does:
- Help you understand how packaging interacts with lender policy.
- Structure loans to work smoothly with your packaging provider’s payment method.
- Coordinate documentation so banks can correctly assess your full income.
“Want to know if packaging your mortgage makes sense for you? Speak with Iconic about an NFP Mortgage & Packaging Review.”