comet555

Hi all,

My husband came home the other day with some rather unexpected news from work. It seems he will be getting a rather large bonus if he is still working there 1 year from now (about 30k). A year after that he'll be getting another bonus (about 50k). Of course we're thrilled about it, and I'm truly not trying to brag I just want some honest advice on how we can keep as much of it as we can. All legally of course! I didn't really want to put the amounts but I figured it might be important. I believe we're already in the highest tax bracket so I assume we'll get lots of tax taken off.

The only thing I can think of is to put a lot of it into our super funds. I would just rather put that money into the mortgage so we can mortgage free sooner.

I've heard of people salary sacrificing their mortgages? Can you do that? We're here on a permanent visa so I can't see how they'd let us do that.

So... does anyone have any ideas?

Amazulu

I get similar size bonuses as well (resources sector etc). I pay mine into my super fund. 15% tax instead of 45%.

It's the only way I know of.

goldchoccycoin

You can definitely salary sacrifice your mortgage repayments. The company I use for my salary sacrifice stuff (not mortgage payments) is Remserv

http://www.remserv.com.au/salaryPack...fer=government

comet555

Thanks, I'll check it out.

Is this something we have to get set up through his company, or do we work it out ourselves?

Also, can we do this as a one off type thing when he gets the bonuses, or would we have to set it up to do it all the time?

Last question.... when something asks for your gross earnings do you include your super or leave it out?

comet555

I tried to use the calculator but could not find anything relating to mortgage payments. I did see remote housing, but that doesn't really work.

Geelong Gent

You can salary sacrifice but employer would be subject to FBT (unless operating as something like a charity whereby they have exception)

How the FBT costs is calculated is as follows:

Say mortgage repayment each month of $3000

3000 x 1.8692 = 5607 Grossed up FBT benefit

5607 x 46.5% = 2608 FBT tax

Benefit therefore is the $3000 less the FBT (if the company recharges it too you).

Apparently the rate of 1.8692 is applicable for most fringe benefits - a rate of 2.0647 is used for items where GST will be deducted. You would obviously take the GST component off first ie if the $3000 above had a GST component it would be: $2727 (Net of GST) x 2.0647 (see $2727 *1.10 = $3000 (Inc GST)).

Even with the FBT component I gain about $16K as a tax benefit (difference between outgoing payments as individual and paying the FBT each year).

GinaUK

It depends on which "sector" you work in. If you work in the corporate sector or non-PBI you can't salary-sacrifice mortgage payments. (I imagine tking works in a different sector where he can do it.)

Gina

comet555

Resources, energy..... more specifically mining (hence the big bonus).

Geelong Gent

You can, but the company in certain sectors is unable to gain FBT relief or exception. So it's not a case of "can't" its a case of "unlikely", but not impossible.

comet555

I'll try and get my husband to check things out at work and see if there's anything that can be done on that end. It definitely sounds as though salary sacrificing your mortgage might be difficult. It would certainly help if it was. Not sure if we'd have to set it to work all year or if they could do a one off payment just for the bonus.

I'll be sure to ask an accountant as well to see if they have any other ideas.

annn

However..... if you do this remember that your employer won't have to contribute 9% to the super, this would mean that in effect you still actually lose 24%ish. If you get $10000 bonus you pay tax at whatever tax band you're on and 9% or $900 employer pays to super although you'll still be taxed 15% on that. If you're on a top tax band then it is still worth doing but if you,re on a lower band may be worth a bit more consideration and advice. Many people are not aware that what you sacrifice does not attract the 9% employer super.

Geelong Gent

The 9% drops off at about $125k or so does it not?

EvannTel

Yes I believe it does - I think its a bit higher than that though and when you say drop off - it goes to zero requirement.

Anyway remember depending on your age you cannot put infinite amounts into super. I have a similar problem and at my age I can only put $50K p.a. into super at 15% contribution tax.

Now from you original post, I used to pay my mortgage off at a far more agressive rate than required so it would be cleared quickly. Then I took some financial advice..... I now pay the standard repayment and put the difference into super. So while I was paying x per month extra in post tax income to my pension I now pay X plus that tax I was paying minus 15% into super (net disposable monthly exactly the same).

Now if we assume that super over the next 15-20 years (in may case) grows at the same rate as my mortgage interest rate then when I retire, I can pay the remaining lump off my mortgage and have a significant amount of tax free cash left over. Makes sense to.

There is one hell of an assumption in that as this year interest rates have been high and super growth negative BUT given enough time, based in history, super funds should exceed average mortgage rates.

Lastly - get good independent advice. We can all give our tuppence worth on here but its probably not worth that much!

obiwan

i was looking at the brochures, it looks like you have to be working for QLD Health, QLD ambulance or one of the companies like Blue Care to have what they call Public Benevolent Institution Status to be able to sacrifice things like a mortgage....

comet555

Yep, I don't think that strategize is going to work for us. Will have to try something else.