Offset account
A transaction account linked to your home loan, where the balance reduces the loan amount that interest is charged on.
- Every dollar in it offsets a dollar of the loan
- Money stays accessible
- Can preserve tax deductions on investment loans
How it works
If your loan is $500,000 and your offset holds $50,000, interest is charged on $450,000. You can withdraw the money at any time.
Offset or redraw?
Paying extra into a loan and redrawing it can affect tax deductibility on investment loans. An offset keeps savings separate, which is often cleaner for investors. Confirm with your accountant.
Many investors hold savings in an offset against their home loan while keeping investment loans on interest only. Get tax advice before setting this up.
Common questions
Is offset interest taxable?
No. It reduces the interest you pay rather than earning interest.
Do all loans have offsets?
No, and some charge a higher rate or package fee.
Related terms
Sources
General information only. It does not consider your objectives, financial situation or needs, and is not financial, credit, tax or legal advice. Rules change, so check current law and get advice from a licensed professional before acting.