Focusing on super, instead of mortgage repayments

Technical resource

This strategy can boost retirement savings and reduce overall tax liability. Upon retirement, individuals have the ability to make loan repayments with tax-free super monies.

This strategy is best suited to clients in a higher tax bracket who are currently making principal and interest repayments on their mortgage, are close to retirement and plan to retire after age 60.

By switching to interest only or reducing the amount of the repayments, the client’s repayment amount is reduced. The amount they save on mortgage repayments, can be redirected to their superannuation fund using a salary sacrifice / personal concessional contribution strategy.

This strategy can boost retirement savings and also reduce your client’s overall tax liability. When the client retires, they have the ability to make loan repayments using tax-free super monies (once they turn 60).

Things to consider when advising on this strategy

  • This strategy works best for investors who can achieve long term average investment earnings exceeding 7% per annum (based on the current increasing but still low interest rate environment.
  • The strategy is not as attractive if interest rates rise.
  • The strategy is less attractive if the client’s marginal tax rate drops to a lower tax bracket.
  • The tax saving is restricted to how much additional concessional contributions can be made, and potentially any catch-up concessional contributions.

Case Study

Robert is a 50 year old full time employee and owns a home which he purchased using a loan. After 10 years of making mortgage repayments of $2,456.50 per month, the outstanding loan balance has now reduced to approximately $311,776, with interest charged at 5% per annum, compounding monthly.

As he is nearing retirement, he wants to explore whether he should start contributing more into superannuation. His loan terms allow him to reduce his regular monthly repayments to as low as $1,400 per month. He decides to reduce his repayments to $1,537 per month, as this allows him to salary sacrifice $1,416.66 per month into superannuation whilst maintaining his current net income.

Financial position

No super contribution

With super contribution

Salary income



Concessional contribution



Taxable income



Tax Payable1



Loan repayments



Increased contributions tax



Net Income



Overall tax saving



Based on an interest rate of 5%, there will be additional interest incurred of $282 p.a. on the loan. However, this will compound for the life of the loan. If Robert maintained his $2,465.50 per month mortgage repayments, he would have repaid his mortgage at his retirement age of 65, however by reducing his repayments he will have an outstanding loan balance at retirement.

Loan position2

No super contribution

With super contribution

Loan balance at retirement



Total interest paid from age
50 to age 65



Increased interest for the period




Offsetting the increased interest payable may be any earnings on the additional funds now in super and the outstanding loan balance may be repaid as a lump sum from his increased superannuation savings. Based on Robert's investment time horizon of 15 years until retirement and his attitude to risk, he invests in a 'growth' investment option, which has an average net after tax return of 7% per annum, compounding monthly.

Superannuation increase3

With super contribution

Increased superannuation balance at age 65


Less lump sum withdrawal to repay outstanding loan


Increased net superannuation savings



1 Based on 2023/24 income tax thresholds, rates and offsets.
2 Assuming interest rate remains at 5% per annum, compounding monthly.
3 Assuming salary sacrifice contributions of $1,416.67 per month are maintained for the duration of the analysis and average net after tax returns are 7% per annum, compounding monthly. 

Next: Help your clients invest to grow

Take the next steps

While gearing has advantages, using savings to gear on a regular basis can offer additional benefits. Regular gearing combines savings with borrowed funds.
Technical resource
Reverse mortgages are home mortgages that work in the opposite way to a normal home mortgage.
Technical resource
The invest to grow strategy shows how investing in equities can be an effective long-term investment. The strategy considers the differences between SMAs and IMAs from a client perspective, and outlines the benefits of using a BT Managed Account.


This information has been prepared by BT, a part of Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (Westpac), for financial advisers only and must not be made available to any client or any other person, or attributed to Westpac or any other company in the Westpac group.

The information is an overview only and it should not be considered a comprehensive statement on any matter nor relied upon as such. Any graph, case study or example is for illustrative purposes only and is not an indication of future performance or result. Where past performance is used, please note that past performance is not a reliable indicator of future performance. Any taxation information is a general statement based on current laws and their interpretation. The article is current as of the date of the article unless stated otherwise. The article does not contain, and should not to be taken to contain, any financial product advice and it does not take into account any person’s financial situation, needs, objectives or taxation situation. Because of this, you should, before acting on the information, consider its appropriateness to your clients, having regard to their financial situation, needs and objectives, and your clients should seek independent professional taxation advice on any taxation matters. It is not the intention of Westpac or any member of the Westpac group that the information be used as the primary source of readers’ information but as an adjunct to their own resources and training and should therefore not be relied on for the purposes of making any financial recommendations or an investment decision. To the maximum extent permitted by law: (a) no guarantee, representation or warranty is given that any information or advice in this website is complete, accurate or up to date or fit for any purpose; and (b) no member of the Westpac group is in any way liable to you (including for negligence) in respect of any reliance upon such information.

This page may also contain links to websites operated by third parties (‘Third Parties’) who are not related to the Westpac Group (‘Third Party Web Sites’). These links are provided for convenience only and do not represent any endorsement or approval by the Westpac Group of those Third Parties or the information, products or services displayed or offered on the Third Party Web Sites.