Offset vs High Interest Savings Calculator
Money in an offset account saves you interest tax-free, while a savings account is taxed. This tool shows the savings rate you'd actually need to come out ahead — and it's usually a lot higher than you'd think.
Your top income tax bracket (e.g. 32.5%)
The amount you'd keep in offset or savings
Savings rate needed to beat offset
9.16%
Offset saves (tax-free)
$2,400/yr
Savings after tax
$1,572/yr
Tax paid on the savings account
$828/yr
The bottom line
At a 6% loan rate and a 34.5% effective tax rate, a savings account would need to pay 9.16% before tax just to match your offset — that's 3.16% more than your loan rate, purely to cover tax.
Keeping $40,000 in your offset is worth $2,400.00 a year, tax-free. To get the same benefit from a savings account you'd have to find — and keep — a rate few accounts ever offer.
Estimates only and not personal financial or tax advice. Figures ignore account fees and assume the balance stays constant for a year.
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Book with these numbersWhy a savings account has to work harder
People often ask whether they'd be better off chasing a high-interest savings account instead of keeping money in their offset. The catch is tax. Every dollar of interest a savings account pays you is taxable income. The interest you save in an offset account is not — it's the same as earning your home loan rate completely tax-free.
That means a savings account has to earn enough extra to cover the tax before it even matches your offset. The break-even rate is simply your loan rate divided by one minus your marginal tax rate:
Required savings rate = Loan rate ÷ (1 − marginal tax rate)
Example only: 6% ÷ (1 − 0.325) = 8.89% (excluding the Medicare levy)
That 8.89% is just one example. On a typical 6% home loan, someone on a 32.5% marginal tax rate would need a savings account paying about 8.89% before tax to break even with their offset — and closer to 9.16% once the 2% Medicare levy is included. Your own figure depends on your loan rate and tax bracket, so use the calculator above for an accurate number. The higher your tax bracket, the bigger that gap becomes — which is why, for anyone with a mortgage, an offset is one of the most powerful (and tax-effective) places to park spare cash.
Key terms explained
The main terms used in this calculator and its results.
- Offset Account
- A transaction account linked to your loan whose balance reduces the amount of interest you're charged.
- Redraw Facility
- A feature that lets you withdraw extra repayments you've made above your minimum, if you need the money back.
- Variable Rate
- An interest rate that can move up or down over time in line with the market and lender decisions.
Frequently asked questions
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