Offset account
An offset account is a transaction account linked to a variable loan; the balance is subtracted from the loan balance before interest is calculated each day.
Offset account, explained.
Money in the offset earns no interest itself, but it saves interest at the loan rate, which is usually higher than any savings rate, and the saving is not taxed. Because the funds stay in a transaction account they remain available at any time.
Offset accounts usually come with a package fee and a slightly higher rate than a basic loan. Whether they pay for themselves depends on the average balance you will hold. For investors, keeping surplus cash in an offset rather than paying down the loan preserves the deductible debt, which matters if the property is ever kept as an investment.
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The Learn section is general information about lending in Australia. It does not take account of your objectives, financial situation or needs, is not credit assistance, and is not tax, legal or financial advice. Lender policies, government schedules and regulations change; check the current position with the relevant body or with us before relying on it.
