We recommend structuring your loans with an offset account linked to your owner-occupied property that all incoming and outgoing funds are channelled.
Here are some key benefits to using a single offset:
Interest savings - every dollar in your offset account reduces the balance of your home loan that accrues interest. So, instead of earning minimal interest in a standard savings account, your savings work to reduce the interest on your loan, potentially saving you thousands over time.
Cash flow efficiency - by channelling all your income, including salary and investment rental income into the one offset account, you keep the loan balance lower for longer. This means you’re always minimising the interest charged on your mortgage. Even for short periods, the impact can be significant.
Simplicity - using one account for all income and expenses keeps your finances organised. You know exactly where your money is, and it simplifies budgeting since there’s only one account to monitor.
Tax strategy - the interest on loans used for investment purposes is generally tax-deductible, while interest on personal or owner-occupied home loans is not. Using the offset account on the owner-occupied loan ensures you reduce your personal, non-deductible interest first.
Of course, we always recommend you speak with your accountant or financial advisor to tailor your strategy to your needs and objectives.
Frequently Asked Questions
What is a single offset account and how does it work to reduce mortgage interest?
A single offset account is a transaction account linked directly to your mortgage—every dollar placed in that account reduces the balance on which interest is calculated. Unlike a standard savings account where interest earned is taxable and often low, your funds in the offset account work immediately to reduce your interest-bearing loan balance. Daily interest savings are calculated on the net balance (loan minus offset balance), typically amounting to significant interest savings over time.
What are the main benefits of using a single offset account instead of multiple offset accounts or a redraw facility?
According to DPN, the key advantages of a single offset strategy are: Interest savings: By channelling your income and cash flow into one offset account, you consistently minimise the interest charged on the mortgage. Cash flow efficiency and simplicity: All incoming salaries and rental income in one place simplifies budgeting and tracking. You aren’t juggling multiple accounts or spreadsheets. Tax‑efficiency: Any interest saved against your owner‑occupied home loan (non‑deductible debt) is prioritised before investment debt (generally tax-deductible), enhancing your overall tax strategy. Compared to redraw facilities, offset accounts offer greater flexibility—you can access your funds freely and still reduce interest daily.
Will using a single offset account save more money than keeping funds in a savings account or making extra repayments?
Yes—because funds in a savings account earn interest, which is usually taxed and often lower than your mortgage rate. In contrast, placing funds in an offset account effectively earns you the full mortgage interest rate—not taxed—and directly reduces what you owe. Additionally, using an offset rather than making extra repayments provides flexibility—you retain access to your cash, while still reducing daily interest charges. Over the life of your loan, even small amounts can add up. For example, having $20,000 in offset might reduce daily interest costs noticeably, compounding into substantial savings.
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