Mortgage Offset vs Invest Calculator
The most common dilemma for Australian homeowners with extra cash. Put money in your offset account to save mortgage interest — or invest for growth? This calculator runs the numbers.
Your situation
Over 10 years, investing wins
$4,095
Investing generates $40,186 after-tax profit vs $36,092 interest saved
Break-even investment return
6.9%
Investments need to return >6.9% gross to beat your 6% mortgage offset after tax. Your assumed return is 8% (6.1% net).
Offset interest saved
$36,092
guaranteed, risk-free
Invest profit (after tax)
$40,186
at 8% gross
Year-by-year comparison
Cumulative benefit of offset (interest saved) vs investing (after-tax portfolio gain).
| Year | Offset saves | Invest gains (after tax) | Winner |
|---|---|---|---|
| Year 1 | $3,052 | $3,038 | Tie |
| Year 2 | $6,220 | $6,261 | Tie |
| Year 3 | $9,507 | $9,679 | Invest |
| Year 4 | $12,916 | $13,305 | Invest |
| Year 5 | $16,450 | $17,151 | Invest |
| Year 6 | $20,112 | $21,232 | Invest |
| Year 7 | $23,905 | $25,560 | Invest |
| Year 8 | $27,830 | $30,151 | Invest |
| Year 9 | $31,892 | $35,021 | Invest |
| Year 10 | $36,092 | $40,186 | Invest |
Investment returns assume 50% CGT discount (assets held >12 months) and that 70% of returns are capital gains. Actual tax treatment varies — dividends, franking credits, and realisation timing all affect your after-tax return. Offset account benefits assume the entire cash amount is in offset continuously. Does not model investment loan interest deductibility (which changes the calculus for investment properties). General information only — not financial advice. Consult a licensed financial adviser and tax agent for your personal situation.
Frequently asked questions
Is it better to put money in an offset account or invest in Australia?
It depends on your mortgage rate, investment return, and marginal tax rate. The key insight: your mortgage rate is a guaranteed, risk-free, after-tax return. To beat it with investments, you need gross returns high enough that after CGT your net return exceeds the mortgage rate. At a 6% mortgage and 37% marginal rate, you'd need roughly 8.5–9% gross investment returns. Historically achievable with diversified equities, but not guaranteed.
Does the CGT discount change the calculation?
Significantly. The 50% CGT discount for assets held over 12 months means your effective tax rate on capital gains is halved. A 37% marginal rate investor pays only 18.5% CGT on long-term gains. This makes investing more attractive than it first appears — the break-even return required to beat your offset is lower than your marginal tax rate suggests. Franking credits on Australian shares add further tax efficiency.
What about investment loans vs home loans in Australia?
Investment property loan interest is tax-deductible (negative gearing), which changes the calculation entirely — the effective after-tax rate of your investment loan is lower than the headline rate. For investment properties, you compare: after-tax investment loan rate vs expected rental yield + capital growth. For your primary residence (PPOR), interest is not deductible, so the full mortgage rate is the relevant benchmark for the offset decision.
Should I split money between offset and investing?
Many financial advisers recommend a hybrid approach: keep 3–6 months of expenses in offset as your emergency fund (certain, liquid, effective return), and invest the remainder. This gives you the security of the offset for liquidity while capturing long-term investment returns on excess capital. The psychological comfort of a fully liquid emergency fund often leads to better long-term investment behaviour (you are less likely to sell in downturns).