Offset Account Australia 2026: How It Works and How Much You Save
Updated April 2026 · 10 min read
The Offset Account: Australia Most Powerful Mortgage Feature
The offset account is uniquely Australian and massively underutilized. It is a transaction account linked to your mortgage where every dollar reduces the interest you pay — dollar for dollar, in real time. At 6 percent interest, AUD 100,000 in your offset saves AUD 6,000 per year in interest. That is a guaranteed, tax-free 6 percent return on your money. No investment can match that certainty. Use our mortgage calculator (switch to AUD) to model offset savings.
The Salary Parking Strategy
Route your entire salary into the offset account. Pay all expenses on a credit card with up to 55 days interest-free. Pay the credit card in full from the offset before the due date. This maximizes the daily balance in your offset. On a AUD 120,000 salary, this strategy keeps an average of AUD 50,000 to 60,000 more in offset throughout the year, saving AUD 3,000 to 3,600 annually in interest — for zero cost.
Over 30 years, maintaining AUD 100,000 in offset saves over AUD 180,000 in interest and cuts approximately 5 years off your loan term. This is equivalent to making AUD 500 per month in extra repayments. Use our amortization calculator and savings calculator to model the long-term impact.
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Frequently Asked Questions
How does an offset account work?
A 100 percent offset account reduces the loan balance that interest is calculated on. If your loan is AUD 500,000 and offset balance is AUD 50,000, you only pay interest on AUD 450,000. This saves AUD 3,000 per year at 6 percent interest — tax-free.
How much does an offset account save?
At 6 percent interest: AUD 20K in offset saves AUD 1,200 per year. AUD 50K saves AUD 3,000. AUD 100K saves AUD 6,000. Over 30 years, AUD 100K in offset saves approximately AUD 180,000 in interest and cuts 5 years off the loan term.
Offset vs redraw: what is the difference?
Offset: separate transaction account, your money stays yours, no tax implications. Redraw: excess payments sit inside the loan, technically belong to the lender until redrawn, and can have tax implications for investment properties. For flexibility and tax clarity, offset is better.
Do I need a 100 percent offset?
Yes. Some loans offer partial offset (e.g., only 50 percent of balance reduces interest). Always choose 100 percent offset — anything less significantly reduces the benefit. Check your loan product details carefully.
Can I have multiple offset accounts?
Some lenders offer multiple offset accounts linked to one loan (useful for budgeting into separate accounts while all reducing interest). CBA, Macquarie, and some others offer this feature. Check with your lender.