Dear all,
I heard that you could scarifice part of your salary to pay off interest in an invetsment loan. is this legal?
Since the amount of interest is a floating amount, how does the employer cope with this moving target (from an administrative point of view)?
Regards
G-Ster
I’ve not heard of this but it can be done for a vehicle. It’s called a Novated Lease.
Depends on your employer. Mine offers this option and they require a letter from your finance provider showing interest to be charged for the coming year. You can then sacrifice this amount and draw it down each quarter to pay off your loan.
Depends on your employer. Mine offers this option and they require a letter from your finance provider showing interest to be charged for the coming year. You can then sacrifice this amount and draw it down each quarter to pay off your loan.Thanks you for this.
Would this apply to all interest plus principal loan as well?Any investment loan type is okay principal and interest or interest only – H/L, Margin Loan, Personal Loan for shares.
Any investment loan type is okay principal and interest or interest only – H/L, Margin Loan, Personal Loan for shares.One more question. What happens if the amount sacrifice is over and above the interest incurred as a result of raoid repayments of the loan?
It’s to your benefit – just another principal payment. By pre-paying interest you will in effect always incur less than expected interest. It means that next year your interest estimate from the bank will be lower.
My understanding is that if your employer repays more than the total amount of interest charged on a loan, then the ATO will classify this as a principle repayment and fringe benefits tax will be assessed on this amount. As a result, if you are not paying tax at the highest marginal rate then you would be worse off.
Check with your human resource department. I salary sacrifice my mortgage on my PPOR [8D] but can not legally do so on an IP. There is also a limit to the amount you can package a year before fringe benefits tax applies. My employer is a health department (State governement.) There are different rules for public and private employers. I can purchase a car on a novated lease but am unable to use this principal on investment interest.[
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Dear all,I heard that you could scarifice part of your salary to pay off interest in an invetsment loan. is this legal?
Regards
G-Ster
Hi All.
My wife uses salery sacrifice’s quit a few things on her wages & it saves her tax. From my limitted understanding of it, the payment’s are made of her gross wage. Therefore she is only tax on the remander. e.g. $70,000.00 gross per year.
$20,000.00 payments.
=$50,000.00 remander to be taxed.
Our tax man has saved my wife about $8,000.00 per year in tax. ( This includes a novated lease on a car ). So talk to your accountant. It may not suit all people but you will never know if you do not ask.
Craigc
P.S. May be this shuold be posted in General Investing ?Salary scarifice for investment interest payments appers to be the way to go. Would this impact on annual leave or long service leave entitlements?
CraigC
I’m not too sure whether how your wife is better off. Does she work for a rebateable employer for FBT (eg non for profit hospital or club)? If she works for a rebatable employer then I say take advanatage of it. But if not then it may not be beneficial.
And what is she sacificing her salary for? Home repayment (private expenses) or interest payments on a IP (tax deductable expenses)?
Her salary sacrifice is made from her gross wage but if the payments are made for a private nature then her employer would be subject to FBT and could be worse off.
DC
Hi DavidC
My wife is a health service manger with the Greater Murry Health Service. ( Riverina MIA area ). Payments are made for private home & insurance ect. As I said I only have limmited knowlage of how her situation works. But my accountant, Who also takes care of our bussines keeps tell her to do it, and he has not steered me wrong over the parst 12 years or so.Craigc
Craig
Your wife is one of lucky few who are able to salary sacrifice private expenses, as she is employed by a rebatable employer. It is definitely a tax advantage for you.
Unfortuantely for the majority of us, we are able to take advantage of this.
DC
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