Australian Offset Account Calculator

Last updated: May 2026. Reflects current Australian metrics.

A 100% offset account is one of the most powerful ways to pay off an Australian home loan early. See exactly how much interest and time you can save by holding your cash against your mortgage.

Loan Details

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%
Yrs

Offset Details

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$

Interest Saved

Over the remaining life of the loan

$0
Time Saved Off Loan 0 Yrs, 0 Mos

Comparison

Total Interest WITHOUT Offset $0
Total Interest WITH Offset $0

How a 100% Offset Account Works in Australia

An offset account is a standard transaction account linked to your home loan. What makes it powerful is how Australian banks calculate interest. Every day, the bank takes your outstanding loan balance, subtracts the balance of your offset account, and only charges interest on the difference.

The Tax-Free Return Advantage

In Australia, if you put $20,000 into a standard high-interest savings account at 5%, you must pay income tax on the $1,000 interest earned. Depending on your tax bracket, you might lose almost half of it to the ATO.

However, if you put that same $20,000 into an offset account linked to a 6% mortgage, you save $1,200 in interest payments over the year. Because this is money saved rather than income earned, it is completely tax-free. This makes a 100% offset account one of the most effective wealth-building tools for Australians.

Offset Accounts vs Redraw Facilities

A redraw facility allows you to withdraw extra repayments you have made directly into the loan account. While mathematically similar to an offset account in saving interest, the ATO treats them very differently. If you ever turn your home into an investment property, withdrawing funds from an offset account does not affect the tax deductibility of the loan. Withdrawing from a redraw facility, however, changes the 'purpose' of the borrowed funds, potentially ruining your negative gearing benefits.

Beware the Package Fee

While offset accounts are incredibly valuable, they are rarely "free". Most Big 4 banks (CBA, NAB, ANZ, Westpac) charge an annual 'Wealth Package' or 'Advantage Package' fee (typically $395 per year) to access a 100% offset account and discounted variable rates. You must ensure the interest saved outweighs this annual fee.

Related Calculators

Mortgage Calculator Borrowing Power Stamp Duty

For more information on purchasing property, visit ASIC MoneySmart Home Loans.

10 Frequently Asked Questions

1. What is the current RBA cash rate?
As of 2026, the RBA cash rate influences all variable home loans. Check the official RBA website for the exact daily rate, but currently, variable rates sit around the low 6% mark.
2. How does the 3% serviceability buffer work?
APRA mandates that banks assess your ability to repay a loan at an interest rate 3% higher than the rate you are applying for. This ensures you can handle future rate hikes.
3. What is Lenders Mortgage Insurance (LMI)?
LMI is insurance that protects the lender if you default. It is usually required if your deposit is less than 20% of the property's value (LVR > 80%).
4. Should I choose a fixed or variable rate?
A variable rate offers flexibility (like offset accounts), while a fixed rate provides repayment certainty for a set period (usually 1-5 years).
5. What is a Comparison Rate?
Required by Australian law, the comparison rate rolls the interest rate and most fees into a single percentage to show the true cost of a loan.
6. What is an offset account?
An offset account is a savings account linked to your loan. Its balance is subtracted from your loan principal before interest is calculated, saving you money.
7. Can I make extra repayments?
Yes, most variable loans allow unlimited extra repayments. Fixed loans usually cap extra repayments (e.g., $10k/year) and charge break fees if exceeded.
8. What is negative gearing?
Negative gearing is an Australian tax strategy where the costs of owning an investment property exceed its rental income, allowing you to deduct the loss from your taxable income.
9. What are stamp duty concessions?
Each Australian state offers stamp duty exemptions or concessions for First Home Buyers purchasing below a certain price threshold.
10. How is interest calculated?
In Australia, home loan interest is generally calculated daily on your outstanding balance and charged monthly.