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How tax can help your offset home loan

If you’re a sole trader in business, working with an offset home loan can be the ticket to significant savings on interest. Here’s how:

Offset tax

If you operate under an ABN, chances are you’re required to complete a quarterly BAS (Business Activity Statement) for the ATO (Australian Tax Office). If you’re registered for GST, you will also be holding tax charged on sales on behalf of the ATO until that BAS statement is due. When considering these two elements, think about your existing debts – such as a home loan – and you will find there are savings to be made. Where you store this money and how you control the estimated tax payment for each quarter (represented on your BAS statement) can equate to big benefits to those using an offset home loan.

Also Read: Try Our Awesome Savings on Tax Deductions Calculator

Also Read: How Sole Traders can benefit from the New Budget’s $20,000 claim ceiling

Also Read: How You Could Pay $10,000 for a $20,000 Work Car

What is an offset home loan?

An offset account is similar to a transaction account which reduces the interest payable on your mortgage by ‘offsetting’ the amount held in your account. A reduction in interest charges can shorten your loan term which means you could be in a position to service your mortgage in full, much sooner.

To illustrate, a 100% offset account with $50 000 in it, on a mortgage of $300 000 would see interest only calculated on a balance of $250 000. On a home loan with 5.5% interest over a 30 year term, this could save you approximately $90 000 in interest, with 7 years chopped from your mortgage.

How does an offset home loan work?

The majority of lenders calculate interest on the outstanding balance you owe at the end of each day. The total interest charged for that month is then added together and illustrated on your statement.

Making repayments monthly means your balance is only reduced once per month. However, by committing to fortnightly or weekly repayments, you can reduce your outstanding balance throughout the month and effectively lower the amount of interest payable.

In fact, if you link an offset account to your mortgage and organise for your income to be deposited into the account, you can reduce your mortgage balance even more frequently. This is because interest on a loan is calculated daily, so each day you have funds in your offset account, even if you need to access them later, will help decrease the overall interest payable.

Estimate how much an offset account could save you with the calculator below:

How can I save on home loan interest when holding GST?

As a small business registered for GST, every time you send out an invoice you will charge an additional 10%. This is not your money, however; you are simply collecting it for the ATO and they will ask for it back (unfortunately). Depending on the scope of your business this can add up to thousands if not tens of thousands of dollars of money that you have in your pocket for up to months at a time.

If you have your offset account on your home loan, that money can bide its time sitting against your borrowed money. This the amount on which home loan interest is charged during the period in which you hold the money.

How to save on home loan interest by managing your BAS?

Every quarter, your BAS statement will arrive with an estimated tax bill for the previous three months and demand that you pay it before the due date. How does the ATO acquire this estimate? It’s calculated from your last registered taxable income, and the ATO starts at that figure and then assumes your business will grow a small percentage. From this thinking, it derives a figure.

With this in mind, any big business purchases you may be planning – such as a new work ute – are best done prior to June 30; this way it will bring down your taxable income in the following year and as a result, the amount on your quarterly BAS statements. That extra money can sit on your home loan for a year longer than if you were to buy that ute on July 1. Hence why #budgetfrenzy is a thing.

The ATO will get all the money it is owed eventually regardless of what you do, but the longer you can have that owed money sitting on your offset home loan, the more you are saving each month on interest repayments on your property.

What are your best offset home loan options?

The following home loans offer competitive features, including an offset account, which could help you to effectively maximise your interest savings this financial year.

Rates last updated June 22nd, 2018
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Loan purpose
Offset account
Loan type
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Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
Macquarie Bank Offset Home Loan  - LVR<70 (Owner Occupier, P&I)
Get a sharp rate and a 100% offset account. Borrowers must have a 30% deposit.
3.69% 3.94% $0 $248 p.a. 70% Enquire now More info
Tic:Toc Live in Loan Variable Rate - Principal & Interest
Go from application to approval in as little as 20 minutes with a variable rate loan from this innovative online lender. Add a 100% offset account for $10 a month.
3.52% 3.53% $0 $0 p.a. 80% Go to site More info
State Custodians Low Rate Home Loan with Offset - LVR up to 80% (Owner Occupier, P&I)
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments.
3.64% 3.67% $0 $0 p.a. 80% Go to site More info
Homestar Finance Variable Rate Home Loan - Owner Occupier ($900 cashback)
Eligible borrowers can get $900 cashback on this loan with a 100% offset account and a redraw facility.
3.54% 3.58% $0 $0 p.a. 80% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 2 Year Fixed LVR ≤90% ($150K+ Owner Occupier)
A fixed rate loan with a 100% offset account and the option to make additional repayments. Loans over $150k receive a discounted rate. NSW, QLD and ACT residents only.
3.69% 4.47% $0 $395 p.a. 90% Go to site More info
HSBC Premier Standard Variable Loan
Package your loan and get an interest rate discount, a 100% offset account and help from an HSBC relationship manager.
3.69% 3.70% $0 $0 p.a. 90% Go to site More info
loans.com.au Offset Variable - Up to 80% LVR (Owner Occupier P&I)
Save on interest by taking advantage of a 100% offset account along with no ongoing fees or application fees.
3.72% 3.74% $0 $0 p.a. 80% Go to site More info
Easy Street Standard Variable Special Home Loan
This mortgage combines a very sharp interest rate with a 100% offset account and it's available with a 5% deposit.
3.49% 3.52% $500 $0 p.a. 95% Go to site More info
ING Orange Advantage Loan - $150,000 to $500,000 (LVR <=80% Owner Occupier, P&I)
Get a 100% offset account and rate discounts for higher borrowing amounts.
3.68% 4.00% $0 $299 p.a. 80% Go to site More info
ClickLoans The Online Home Loan - LVR <70% with Offset
Enjoy all the benefits of the Basic Home Loan and take advantage of an offset account.
3.64% 3.84% $0 $0 p.a. 70% Go to site More info
loans.com.au Offset Variable - Package Offset (Investment, P&I)
Package your owner occupied loan with investment loan and receive a discounted investment rate. 100% offset account included.
3.97% 3.99% $0 $0 p.a. 80% Go to site More info
Beyond Bank Low Rate Special Home Loan - LVR ≤ 80% (Owner Occupier)
Get a 100% offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.79% 3.79% $0 $0 p.a. 80% Go to site More info
State Custodians Low Rate Home Loan with Offset - LVR 80% to 90% (Owner Occupier, P&I)
Save on interest with a free 100% offset account and buy your property with just a 10% deposit.
3.84% 3.87% $0 $0 p.a. 90% Go to site More info
ING Orange Advantage Loan - $500k to $1m (LVR <=80% Owner Occupier, P&I)
Get a 100% offset account and rate discounts for higher borrowing amounts.
3.68% 4.00% $0 $299 p.a. 80% Go to site More info
ME Flexible Home Loan With Member Package - LVR <=80% $400k up to $699,999 (Owner Occupier, P&I)
Save on interest with a 100% offset account and save on other ME products with this package loan.
3.69% 4.11% $0 $395 p.a. 80% Go to site More info
ClickLoans The Online Investor Home Loan - LVR <70%
Investors can get a 100% offset account and a low rate with a 30% deposit. 100% online application process.
3.88% 3.88% $0 $0 p.a. 70% Go to site More info
Community First Accelerator Home Loan Package - >$250k (Owner Occupier, P&I) Special Offer
Get interest rate discounts and waived fees on this package loan with a 100% offset account.
3.59% 3.99% $600 $395 p.a. 95% Go to site More info
Bankwest Complete Home Loan Package Variable - LVR <=90% (Owner Occupier, P&I)
Package your loan with an eligible credit card for discounts on rates and fees, and get a 100% offset account.
3.70% 4.13% $0 $395 p.a. 90% Go to site More info
State Custodians Low Rate Home Loan with Offset - LVR up to 80% (Investor, P&I)
This investment loan keeps fees low, has a sharp interest rate and comes with a 100% offset account.
3.89% 3.92% $0 $0 p.a. 80% Go to site More info
Community First Accelerator Home Loan Package - <$250k (Owner Occupier, P&I) Special Offer
A package loan that offers discounts and a 100% offset account.
3.69% 4.09% $600 $395 p.a. 95% Go to site More info
ClickLoans The Online Investor Home Loan - LVR <80%
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
4.14% 4.14% $0 $0 p.a. 80% Go to site More info
ME Flexible Home Loan Fixed with Members Package - 2 Year Fixed Rate (Owner Occupier, P&I)
Lock in a competitive rate for owner occupiers for two years. Extra repayments up to $30,000 over the life of the fixed period can be made.
3.84% 4.17% $0 $395 p.a. 80% Go to site More info
loans.com.au Offset Variable - 80% to 90% LVR (Owner Occupier P&I)
A home loan with no ongoing fees. This loan is available for refinances and purchases.
4.04% 4.06% $0 $0 p.a. 90% Go to site More info
Tic:Toc Investor Interest Only Variable Rate Home Loan
A variable interest-only loan for investors. Fast application, low fees, optional offset account. 100% online lender..
4.19% 4.20% $0 $0 p.a. 80% Go to site More info
ING Orange Advantage Loan - $1M+ (LVR <=80% Owner Occupier, P&I)
Get a fully-featured loan with a 100% offset account and discounts for higher borrowing amounts.
3.64% 3.96% $0 $299 p.a. 80% Go to site More info
ME Flexible Home Loan Fixed - 2 Year Fixed Rate (Owner Occupier, P&I)
Access a fee-free 100% offset account and pay no application or ongoing fees.
3.99% 4.86% $0 $0 p.a. 80% Go to site More info
Mortgage House Advantage Variable Home Loan - LVR 80% (Owner Occupier, with Offset)
Get a 100% offset account to save on interest charges, and pay no application fee.
3.68% 3.83% $0 $10 monthly ($120 p.a.) 80% Enquire now More info
St.George Fixed Rate Advantage Package -  2 Year Fixed Rate (Owner Occupier, P&I)
Switch to this loan and can get $1,500 cashback. Conditions apply. Package your home loan with a Qantas rewards earning Amplify credit card.
3.89% 4.96% $0 $395 p.a. 95% Enquire now More info
Virgin Reward Me Variable Home Loan - LVR <= 80% ($750k+ Owner Occupier, P&I)
Earn Velocity Points on your mortgage (for a limited time, subject to eligibility requirements). Plus, access a 100% offset account to save on interest.
3.64% 3.78% $0 $10 monthly ($120 p.a.) 80% Enquire now More info
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier) P&I
Get discounts on a range of Commonwealth Bank products and enjoy the option of fee-free extra repayments during the fixed term.
3.89% 4.97% $0 $395 p.a. 95% Enquire now More info
ANZ Breakfree Home Loan Package - $250,000 to $499,999 (LVR <=80% Owner Occupier, P&I)
A discounted variable loan package for under $500 000 home loans.
4.40% 4.80% $0 $395 p.a. 80% Enquire now More info
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