Australian homeowners are redirecting their PAYG tax into their mortgage — and paying it off in 7 - 10 years

These are government tax incentives, written into law and administered by the ATO. More than 1.1 million Australians already use them. Not every household qualifies — and most that do have never been shown how.

There is a number most Australians never work out, and it is far larger than they expect.

It isn't the mortgage, and it isn't the mortgage interest, although we'll come to both of these. It's the income tax you'll hand over to the ATO over the life of your mortgage.

Work yours out below. It's hard to un-see.

Those figures assume nothing changes. No pay rise, no bracket creep, no second income. In practice most households pay more.

And unlike your mortgage, the tax bill isn't a balance you're paying down. There is no final payment. You'll make it again next year, and the year after that, until you stop working.

Now the other number

Take a $750,000 mortgage over thirty years. At 6.0%, the repayment is about $4,497 a month. Most people know that figure. Very few have looked at what it is actually made of.

Here is the first one, broken open.

$3,750 of it is interest. $747 comes off the loan.

The ratio improves as the years go by, slowly. But run it to the end and the maths is unforgiving: $1,618,786 repaid on $750,000 borrowed. The interest alone comes to $868,786 — more than the house cost in the first place.

Nobody sends you a statement for that figure. It doesn't appear on your loan account, and it never shows up on your tax return. It is simply the price of taking thirty years.

And not a cent of it is deductible. Your home is the most expensive debt most people will ever carry, and it is the one the tax system gives you nothing for.

Pay it out in ten years instead of thirty, and $619,602 of that interest is never charged. Meaning it stays in your back pocket.

And from year eleven, the repayment simply stops. That's $4,497 a month — a little over $1,000 a week — staying in your account for the next twenty years, instead of going to a bank.

So there are two numbers, not one. What the ATO takes, and what the bank takes.

So how do some households finish in 10 years instead of thirty?

A portion of what they'd otherwise pay the ATO is redirected into their mortgage instead.

The government tax incentives that make it possible aren't obscure, and they aren't a loophole. They're written into the Income Tax Assessment Act, administered by the ATO, and used every year by more than a million Australians.

They exist for a reason. A household that reaches retirement owning its home outright, with assets behind it, is a household that never leans on the age pension. Successive governments have decided that is worth encouraging — and the incentives are the encouragement.

The rules aren't the difference. It's how a household is structured, and when. Both are decisions — and most people never find out there was one to make.

"Isn't that just for wealthy people?"

It's the first thing most people say, and the ATO's own data says otherwise. The people using these incentives are, overwhelmingly, ordinary salary earners. Not the wealthy.

There aren't two tax systems in this country — one for the wealthy and one for everyone else. There is one system. What the wealthy have is better advice. Find out whether your household qualifies to take advantage of the same incentives.

Why doesn't your accountant mention this?

Most accountants are engaged to do one job well: lodge an accurate return for a financial year that has already finished. That work is retrospective by definition. By the time your return is prepared, every decision that could have changed the outcome was made ten months ago.

Correct financial structuring is a different job, done at a different point in the calendar, and not one most accountants take on.

Which is why the majority of homeowners discover this in their late fifties — when there's no longer enough runway for it to do much. If you have a decade or more of working life ahead of you, it is worth finding out whether you qualify.