Does anyone know how salary sacrifice arrangements (e.g. novated lease, sacrifice to super, sacrifice to buy shares) that cause your net pay to be hugely reduced will affect your serviceability when applying for credit (credit cards, personal loans)?
Do the financial institutions base their credit assessment on gross pay or net pay?
They base it on your ability to repay. So if you're income is reduced due to salary sacrifice arrangements or you're already committed to credit, then your serviceability will be affected.
Just explain that the sal sac goes towards expenses/mortgage etc. They have calculators to assess this. They may need your ITR
In my experience, if it's voluntary and you can stop it without a significant notice period it didn't matter.
Credit card - did have to explain to the overseas team what salary sacrificing was lol
Mortgage - no issues
I salary sacrifice into super and a discounted share scheme
I get denied on credit cards even with 400k in shares, 200k super and an 800k mortgage.
I did a salary sacrifice mid last year on my car. Net pay obviously lower then previous. Have applied for 3 credit cards (about to apply for my 4th this month) since. 0 rejections so far. I've applied cards with the following limits as I was testing the waters: 6k, 10K, 20K. 4th card will probably in the 15k range.
It basically depends on the FI as to what they use, banks differ in policy etc. But I can tell you that the two places I've worked in the last 30yrs both applied similar policy - if the salsac is voluntary eg into super, or as part of a health worker package which allows packaging of mortgage / rent payments, credit card payments etc, then the full gross was taken into account. If the salsac was towards share purchase or additional leave purchase, which is normally agreed to over a set period of time, then that salsac is deducted from gross before calculating serviceability.
If the salsac is for a novated lease it's common practice to request the actual lease docs; the full lease repayment (not the running costs, just the finance) is added to liabilities but full gross income used to service.
Hope that helps.
Thanks all for the insights!
It doesnt really matter because they also assess your other commitments (in the case of a novated lease, for example; whereas super and shares are discretionary and not a commitment). However, to answer your question, they usually ask for gross salary