Mortgage, Super or HECS: Where Should Your Next $10,000 Go?

A $10,000 mortgage or HELP payment comes from money you have already paid tax on. Salary sacrifice works differently. Your employer sends part of your gross pay to super before income tax is taken out, then the fund generally deducts 15% contributions tax. Set up the arrangement with your employer before you earn the pay.

Redirecting $10,000 of future pay into super reduces take-home pay by about $6,800 at a $100,000 salary. About $8,500 reaches super after contributions tax. The mortgage and HELP amounts should both be the same $6,800.

Salary sacrifice normally does not reduce your compulsory HELP repayment. The sacrificed amount is reported and added back when the ATO works out repayment income. The calculator includes this rule when it works out the change in take-home pay.

Enter your salary, the gross amount you could sacrifice, your mortgage and your HELP balance. The calculator works out the change in take-home pay and uses that same cash cost for all three options.

Here is the calculator's default example. It uses a $100,000 salary, a $500,000 owner-occupier mortgage at 6.5% with 25 years left, a $30,000 HELP balance and 20 years until retirement.

Read each result on its own terms. The super figure is a projected balance on one future date. The mortgage figure is interest that would have been paid across the remaining loan. The HELP figure is indexation that would have been added before the debt was cleared.

The largest number does not settle the choice. Access, timing and uncertainty are part of the result too.

Income tax changes how much take-home pay you give up to put $10,000 of gross salary into super. Employer super also uses part of the concessional contributions cap. That can stop the full contribution from fitting at higher salaries.

*Employer super of 12% is about $24,000 on a $200,000 salary. That leaves $8,500 of the ordinary $32,500 cap before any other concessional contributions. You may have unused cap room from the previous five years if your total super balance was under $500,000 at the previous 30 June. Check the available figure in ATO online services.

The HELP saving falls at higher salaries in this example because larger compulsory repayments clear the $30,000 balance sooner. There are fewer years for a voluntary payment to prevent indexation.

The table assumes full-year hospital cover, a $1,000 work-related deduction and no existing salary sacrifice. Super grows at a steady 6.1% after fees and tax. HELP uses 2.8% indexation and 3.7% salary growth. The mortgage rate stays at 6.5%. Treat these settings as planning assumptions. They are not forecasts.

Start with the job the money needs to do. These checks can change which result is useful:

• More expensive debt or no emergency savings: include those in the comparison first. A HELP payment cannot be taken back. Super is generally unavailable until you meet a condition of release.
• You may need the money again: a 100% offset reduces the loan balance charged interest while the cash stays in a transaction account. Compare the loan rate, fees and access terms. Redraw follows the lender's rules for access, limits and fees.
• Retirement is the goal: check employer super, existing contributions and available carry-forward amounts before adding more. Division 293 can add another 15% tax when income plus relevant contributions exceeds $250,000. Give a lower investment return a try as well.
• You are considering HELP: compare a partial payment with clearing the balance. A voluntary payment cannot be withdrawn. A partial payment normally leaves the income-based compulsory repayment unchanged.
• You are applying for a home loan: ask the lender or broker for the result with and without the HELP debt. Policies differ. Clearing the balance can affect an application differently from making a partial payment.

Try the numbers twice. Change the mortgage rate, lower the super return and test a different HELP indexation rate. Pay particular attention to when you may need the money again.