Borrow more with a fringe benefits mortgage
Some employers and organisations provide their employees with fringe benefits such as a car allowance, a living-away-from-home allowance (LAFHA) or rent-free housing in lieu of a higher income.
Normally, these extras aren’t included in your assessable income when you apply for a home loan but we know of some lenders that will accept fringe benefits so you can increase your borrowing power.
How much can I borrow?
As long as you can prove that the fringe benefit is regular and ongoing, you could potentially borrow up to 95% of the property value or up to 105% of the property value with your parents acting as guarantor for your home loan.
Company car and LAFHA are two of the most common fringe benefits that we deal with.
One of our lenders will actually accept up to 100% of your car allowance or will add $5,000 to your assessable income.
Other benefits are accepted on a case by case basis.
The more fringe benefits or additional salary packaging income you can add to your assessable income, the more you can borrow!
How do I get approved?
We know of two lenders that will add fringe benefits to your gross taxable so it better reflects your actual income.
The amount that the lender will add and how much of the fringe benefit they will use depends on the type of benefit it is.
Call us on 1300 889 743 or complete our free assessment form to discover if you qualify for a fringe benefits mortgage.
What are fringe benefits?
Fringe benefits are typically provided to high-paid employees at large organisations in recognition of the work that the job entails.
This could be for excessive travel or the need for you to live and work interstate or in another country for a period of time.
They may also just be added perks of the job role.
These are the most common types of fringe benefits an employee may receive and will usually be considered by a couple of our lenders:
- Company car: This includes funds to cover petrol, maintenance and repairs.
- Car allowance: This may be in the form of expense payments or residual fringe benefits such as getting reimbursed for tolls and parking.
- Entertainment: This can include drink, food, travel and recreation for an event like a staff cocktail party.
- Housing: This could be rent-free or at reduced rent.
- Board or LAFHA: This is where you’re temporarily required to live away from home for a certain period of time for work purposes so these benefits may include an allowance for two meals a day, for instance.
- Loans with no or reduced interest rates: Many employers offer loans in the form of covering the costs of a training program or educational course. You either only have to cover a small percentage of the course fee or the employer waives it completely, known as a debt waiver fringe benefit.
- Health and group life insurance.
- Child care and assistance reimbursement.
- Employee discounts.
- Employee stock options.
- Other expense reimbursement.
The above fringe are considered industry awards.
Employers offer fringe benefits to employees because the benefits are either tax-free or attract fringe benefits tax (FBT), which is much lower than the tax for employee salaries.
What fringe benefits aren’t included?
It’s difficult to say what types of fringe benefits will or will not be accepted by bank because they’ll be assessed on a case by case basis.
As a general rule though, the benefits have to be regular, ongoing and substantial enough, such as $5,000 as a car allowance, to be considered and added to your gross income.
Temporary benefits, such as your employer sending off on an overseas holiday, may not be accepted.
However, if you travel on a regular basis for work and are given a living allowance, then this may be considered in your fringe benefits mortgage application.
In some cases, the value of the fringe benefits you receive may be added to your income but you may limited to borrowing up to 80% of the property value.
Call us on 1300 889 743 or complete our online assessment form and we can tell you if you qualify for a fringe benefits mortgage.
What do I need to provide?
Typically, the lender will just want to see your:
- Your last 2 payslips.
- Your last 3 months bank statements show regular deposit into a savings account.
- Your last 2 years group certificates or pay-as-you-go (PAYG) summaries (these statements should clearly show the fringe benefits you receive outside of your salary income).
On top of this, you’ll need to provide an employment letter that shows:
- The length of your employment.
- Your employment type, whether it’s full-time, part-time or casual.
- A complete breakdown of the fringe benefits you’ve received since you started working whether the payments are for your personal discretionary use or for work purposes only.
Does it matter how I receive the fringe benefit?
In order for your fringe benefit to be considered for a home loan, it must appear on your PAYG summary as a reportable fringe benefits amount.
That means benefits like LAFHA, a meal allowance and a company car allowance would appear on your statement.
However, something like a discount card would not appear on your PAYG summary so it would be difficult to prove that it is a regular and ongoing fringe benefit.
What if there is debt attached to the fringe benefit?
If you’ve asked your boss for a cash advance or a loan, there may low interest attached to this debt.
Of course, this all depends on your employer!
Don’t worry though: this debt shouldn’t impact your borrowing power or serviceability for a fringe benefits mortgage.
Is a fringe benefit the same as salary sacrificing?
No. With salary sacrificing you’re essentially forgoing part of your future salary in return for benefits of a similar value such as voluntary superannuation contributions or the cost of leasing and running a car.
In this way, it reduces your taxable income and the tax your employer pays on those fringe benefits are at FBT tax rates, which are lower than standard wage tax.
Do you receive a packaged salary and need a mortgage?
One of our lenders will accept up to 100% of your packaged income so complete our free assessment form and find out if we can get you approved.
Do I pay tax on fringe benefits?
FBT is payable by your employer, not you as the employee.
However, if you receive fringe benefits in excess of $2,000, your employer must record the grossed-up taxable value of those benefits on your payment summary for the corresponding income year.
This is know as your reportable fringe benefits amount.
However, not all fringe benefits are reportable.
If you’ve just started receiving fringe benefits as part of your job, you can find out more about the tax implications on the Australian Taxation Office website.
Do you need a fringe benefits mortgage?
Discover if you qualify for a fringe benefits mortgage by calling us on 1300 889 743 or by completing our free assessment form today.
Is your employment and income situation a little outside of the box?
Check out the unusual employment loans page for more information.