hi there, another question for experts of this forum. I am looking for an investment property but don't know when I will be able to get it. meanwhile, I am thinking of salary sacrifice to reduce my tax. my worry is my disposable income will drop hence jeopardize my lending capacity. which income will the banks look at ? the gross income before tax or your final income on hand ?
Will salary sacrifice jeopardise my lending capacity ?
- Thread starter joe.clayton
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Yep - and it can have a massive effect.
I see it quite a bit when dealing with local public servant clients. Some are on decent incomes - but their borrowing capacity takes a big hit when they've packaged up a new Audi :-(
It essentially becomes a liability.
If the salary sacrifice is for something that is voluntary and can be stopped at any time - then it shouldn't have an impact.
Cheers
Jamie
I see it quite a bit when dealing with local public servant clients. Some are on decent incomes - but their borrowing capacity takes a big hit when they've packaged up a new Audi :-(
It essentially becomes a liability.
If the salary sacrifice is for something that is voluntary and can be stopped at any time - then it shouldn't have an impact.
Cheers
Jamie
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If by salary sacrifice you mean pay your PAYG income into super then no it wont affect your borrowing capacity as it can be stopped at anytime.
The lenders take this approach with all deductions that "can be stopped at anytime".
The lenders take this approach with all deductions that "can be stopped at anytime".
I agree with Terry, it depends what you're salary sacrifice into. I assumed super rather than a vehicle, and b/c it can be stopped anytime it's not usually an issue.
A car on the other hand is completely different, as previously mentioned it's a liability and can make a BIG difference.
A car on the other hand is completely different, as previously mentioned it's a liability and can make a BIG difference.
Yes it will have an impact as others have suggested.
As an example, if we're talking about a car here and you're going to finance is somehow, there's generally a slight difference between packaging it up with your salary vs getting a personal car loan.
Generally speaking, banks will treat your monthly repayment as an expense that needs to go into their calculators. Assuming all the financing costs are equal between the two options, salary packaging often 'packages' up more than the cost of the motor vehicle and includes the on costs (fuel, servicing, etc) - this is captured in your monthly repayment and hence ends up being worse for your serviceability when compared to a personal loan.
Cheers,
Redom
As an example, if we're talking about a car here and you're going to finance is somehow, there's generally a slight difference between packaging it up with your salary vs getting a personal car loan.
Generally speaking, banks will treat your monthly repayment as an expense that needs to go into their calculators. Assuming all the financing costs are equal between the two options, salary packaging often 'packages' up more than the cost of the motor vehicle and includes the on costs (fuel, servicing, etc) - this is captured in your monthly repayment and hence ends up being worse for your serviceability when compared to a personal loan.
Cheers,
Redom
The effect of most Sal Sac REDUCES available income. Hence it affects capacity. Shahin's comment is true for existing salsac that you then stop such as the example of extra super. However if its a SalSac for a car that has 4 years to run then its a concern since take home income may drop by $400 a month
Where SalSac may assist (marginally) is where a salsac arrangement is used it may leave more net pay then if you paid the expense from after tax salary. But it still affects serviceability.
However if you had a SalSac car and its about to end then the lender needs to be aware that capacity to service will soon increase.
Where SalSac may assist (marginally) is where a salsac arrangement is used it may leave more net pay then if you paid the expense from after tax salary. But it still affects serviceability.
However if you had a SalSac car and its about to end then the lender needs to be aware that capacity to service will soon increase.
There's a couple of forms of salary sacrifice that don't hurt you, such as super, public hospital living expenses or voluntary employee share plans. One of the key factors is that the ongoing costs are voluntary.
Novated leases hurt your affordability more than a regular car loan even though it might be a financial benefit for you. The reason is they also include maintenance and running costs of the car. Normally lenders include this in part of their living allowances. When you take a novated lease, the lenders don't adjust the living allowances accordingly. Essentially they double dip on a liability.
Any form of salary sacrifice that isn't purely voluntary is going to have a massive negative affect on your borrowing capacity.
Novated leases hurt your affordability more than a regular car loan even though it might be a financial benefit for you. The reason is they also include maintenance and running costs of the car. Normally lenders include this in part of their living allowances. When you take a novated lease, the lenders don't adjust the living allowances accordingly. Essentially they double dip on a liability.
Any form of salary sacrifice that isn't purely voluntary is going to have a massive negative affect on your borrowing capacity.
there are sal sac schemes esp with charitable institutions where the benefits can be useful, effectively doubling the tax free threshold for many.
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