Mortgage Offset Calculator Australia 2025-26
See how your offset account could save you years of repayments.
Estimate how much interest your Australian offset account can save, how much loan time it can cut, and when offset strategy beats extra repayments after tax.
Australia Offset Notes
Australian offset accounts are most valuable when you keep salary and savings parked against the mortgage balance for as many days of the month as possible.
This version is tailored to Australian offset strategy, where investors often compare offset with redraw because of future tax-deductibility concerns.
Australian version note: this mortgage offset keeps the calculation anchored to AUD amounts, local product names, Australian tax language, and the way banks, employers, agencies, or advisers usually describe the inputs.
Local cues stay visible where they matter: ATO, PAYG, superannuation, Medicare levy, stamp duty, kilometres, comparison rate, APRA, Centrelink, GST, and Australian-dollar results are not rewritten into overseas vocabulary.
Use the output as an Australian estimate first, then sanity-check it against local quotes, lender criteria, government thresholds, state rules, or professional advice before relying on the number.
Offset saves interest daily. Keep all savings in your offset to maximise benefit.
Select the question that matches where you are right now.
Use this calculator to plan and model your financial situation.
Compare scenarios by adjusting inputs. Use the precision bar to reveal more detail. Results update in real time as you type.
Not professional financial advice, not a guarantee of any specific outcome, and not a substitute for qualified advice for significant decisions.
All calculations run entirely in your browser using standard formulas. No data is sent to any server.
The inputs that most influence this result are shown in the breakdown above. Even small changes to key variables can have a significant compound effect over time.
Longer periods amplify both growth and cost. Starting one year earlier or later can change a financial outcome by more than you expect.
Even a 1% change in rate can materially change the outcome over a long period. Use Standard or Advanced mode to model rate sensitivity.
Most financial variables have a non-linear relationship with the result — they compound. The sensitivity table in Advanced mode shows this clearly.
To improve this result, focus on the inputs with the highest leverage. Small changes to the right variable often produce much larger outcomes than large changes to less important ones.
Adjust inputs one at a time. The one that moves the result most is your binding constraint — focus effort there first.
Use the Scenario A/B feature in Advanced mode to compare two situations side by side.
Many financial decisions benefit from timing. Starting earlier, fixing a rate at the right moment, or clearing a debt before applying for new credit can each produce significant improvements.
Depending on what you are planning, these are the natural next steps after reviewing this result.
This calculator shows one part of a financial decision. The related calculators below help you model adjacent factors.
Switch to Standard or Advanced mode and use the scenario comparison tool to model best, expected, and worst case.
For decisions involving significant amounts of money, use this result as a starting point for a conversation with a qualified financial advisor.
How a mortgage offset account saves interest
The offset mechanism
An offset account is a transaction account linked to your mortgage. The bank calculates interest daily on (Loan balance − Offset balance). If you have a $500,000 mortgage and $60,000 in offset, interest is charged on $440,000.
Daily interest saving calculation
Daily interest saving = Offset balance × (Annual rate ÷ 365). With $50,000 in offset on a 6.2% rate: $50,000 × (0.062 ÷ 365) = $8.49/day = $3,099/year saved.
| Offset balance | Loan rate | Annual interest saving | Monthly saving |
|---|---|---|---|
| $20,000 | 6.2% | $1,240 | $103 |
| $50,000 | 6.2% | $3,100 | $258 |
| $100,000 | 6.2% | $6,200 | $517 |
| $150,000 | 6.2% | $9,300 | $775 |
Offset account savings examples — interest saved and years reduced
| Loan | Rate | Offset balance | Annual saving | Loan reduced by |
|---|---|---|---|---|
| $400,000 | 6.2% | $30,000 | $1,860 | ~2.5yr shorter |
| $500,000 | 6.2% | $50,000 | $3,100 | ~3.5yr shorter |
| $500,000 | 6.2% | $100,000 | $6,200 | ~6yr shorter |
| $600,000 | 6.5% | $80,000 | $5,200 | ~4.5yr shorter |
| $700,000 | 6.5% | $120,000 | $7,800 | ~5.5yr shorter |
Years shortened assume the offset balance is maintained throughout the loan and the saving is applied to reduce the principal balance progressively.
Offset account vs redraw facility — key differences
Offset account
Money sits in a separate transaction account. Fully accessible — you can spend it at any time. Interest is calculated on (loan balance − offset balance) daily. The loan balance on your statement does not reduce when you add money to offset.
Redraw facility
Extra repayments go directly into the loan, reducing the loan balance. Money is accessible via redraw, but some lenders restrict or delay access. The loan balance on your statement reduces with every extra payment.
| Feature | Offset account | Redraw facility |
|---|---|---|
| Interest saving | Identical | Identical |
| Accessibility | Immediate (transaction account) | May have restrictions |
| Loan balance on statement | Unchanged | Reduces |
| For investors (tax) | Preferred (deductibility) | Less preferred |
| Available on fixed loans | Rarely | Often (limited extra pmts) |
How to maximise the benefit of your offset account
Pay everything through offset
The interest saving from offset is calculated daily — even a dollar in your offset saves a tiny amount of interest every day. Maximise your average daily offset balance by: having your salary credited directly to your offset account, paying all bills from the offset account (not from a separate transaction account), and keeping any savings and emergency funds in the offset.
Avoid moving money out unnecessarily
Every day money sits in your offset, it is saving interest at your mortgage rate. Parking $20,000 in a 5% savings account while your mortgage rate is 6.2% is a net loss of 1.2% on that money per year. Your mortgage offset is your best savings account.
Salary credit timing
If your employer pays fortnightly on a Friday, depositing goes into your offset for the weekend before you pay weekly bills early the following week — this timing effect is minor but accumulates over decades.
Why investors prefer offset accounts over redraw
The tax deductibility question
Mortgage interest on a rental property is tax-deductible only if the loan was used to purchase the investment property. Making extra repayments (reducing the loan balance via redraw) and then redrawing funds for personal use converts that portion of the loan to non-deductible — a significant tax problem.
Offset solves this
An offset account keeps your money separate from the loan. The loan balance never changes — only the effective interest charged changes. If you later redraw for personal use, there is no 'mixed purpose' loan problem. The full original loan remains deductible.
For future property investors
If you currently live in your home and plan to convert it to an investment property later, keeping funds in offset (rather than redraw) preserves the full loan balance as deductible. This is one of the most valuable and commonly overlooked tax strategies for aspiring property investors.
❓ Frequently asked Frequently asked questions
How does an offset account save money?
An offset account reduces the balance on which daily interest is calculated. $50,000 in offset on a $500,000 loan at 6.2% saves $3,100/year in interest — equivalent to a 6.2% after-tax return on that $50,000.
Is the interest saving from offset the same as making extra repayments?
Yes — the daily interest saving is identical whether you use an offset account or make extra repayments into the loan. The difference is accessibility (offset is fully liquid) and tax treatment for investors (offset is preferable).
Can I have an offset account on a fixed rate loan?
Most lenders do not offer offset accounts on fixed rate loans, or limit the offset to a capped amount (e.g., $10,000–$20,000). This is a significant disadvantage of fixing rates. Variable rate loans almost universally include a 100% offset account.
Should I put my emergency fund in my offset account?
Yes — your offset account is the best place for your emergency fund. It earns an effective return equal to your mortgage rate (6%+) and is fully accessible. A separate high-interest savings account at 5% is less efficient when your mortgage charges 6.2%.
Why do property investors prefer offset over redraw?
Making extra repayments reduces the loan balance (redraw). If you later withdraw from redraw for personal use, that portion of the loan becomes non-deductible — you have 'tainted' the loan. Money in an offset account is entirely separate and never mixes with the loan, preserving full deductibility.
Where these figures come from
Property and mortgage figures on this page are drawn from the Reserve Bank of Australia (rate data), APRA (serviceability and lending rules), the ATO (CGT and rental rules), and State Revenue Offices (stamp duty).
- Mortgage & variable-rate data — RBA — Lenders' Interest Rates (F6).
- Lending serviceability buffer (3%) — APRA — Prudential Practice Guide APG 223.
- Capital gains tax & main residence — ATO — Capital gains tax.
- Negative gearing & rental income — ATO — Rental properties.
- Stamp duty (NSW example) — Revenue NSW — Transfer duty.
- First Home Owner Grant schemes — FirstHome.gov.au.
Last checked: April 2026. Rates and thresholds are reviewed against the source of record each November, when annual adjustments for the following tax year are published.