Offset Account vs Redraw Facility
Compare Australian offset accounts and redraw facilities. Calculate interest savings, liquidity, and tax implications.
Interactive Comparison Simulator
Adjust the variables below to simulate outcomes, compare interest rates, and see real-time projections.
Side-by-Side Comparison
A direct comparison of features, rules, limits, and eligibility requirements.
| Feature / Detail | Offset Account | Redraw Facility |
|---|---|---|
Account Type | Separate transaction account linked to loan | A feature inside the home loan itself |
Liquidity / Access | Instant (debit card, internet transfers) | Subject to lender approval & daily limits |
Tax Treatment (if renting) | Preserves tax deductibility of the loan | Withdrawing redraw money can contaminate tax deductions |
Inflation Protection | Low (eroded by inflation) | High (beats inflation long-term) |
Management Effort | None (passive) | Low (automated or index-tracked) |
Pros & Cons Breakdown
Analyze the advantages and drawbacks of each financial product before making a decision.
Offset Account Pros & Cons
Advantages
- Instant access to cash via ATMs/debit cards.
- Protects tax-deductible interest status for future investment conversions.
- Reduces mortgage interest dollar-for-dollar.
Disadvantages
- Often comes with annual package fees ($300-$400).
- Lenders may charge a slightly higher interest rate.
- Easy access might tempt you to spend savings.
Redraw Facility Pros & Cons
Advantages
- Usually free with basic no-fee home loans.
- Reduces mortgage interest immediately.
- Prevents impulsive spending by keeping cash locked in the loan.
Disadvantages
- Withdrawals can have transfer delay or limits.
- Re-borrowing redraw funds changes tax-deductibility status.
- Lenders can technically withhold redraw access in emergencies.
The Verdict
Offset is best for tax flexibility and liquidity; Redraw is best for cost-saving.
An offset account behaves like a standard bank account and is highly recommended if you might rent out the property later. A redraw facility is a free, basic option suited to owner-occupiers who don't need instant cash access.
Choose Offset Account if...
Property investors, high savers, and those wanting daily liquidity.
Choose Redraw Facility if...
Owner-occupiers looking to save on bank package fees, and conservative savers.
Frequently Asked Questions
Common questions answered regarding Offset Account and Redraw Facility.
Yes. Both offset and redraw reduce the loan principal, saving you the exact same amount of interest.
Yes. Instead of earning taxable interest on savings, you save non-taxable mortgage interest, which is highly tax-effective.
This comparison is reviewed regularly and updated when tax laws, interest rates, or contribution limits change in the country.