Newspaper article The Observer (Gladstone, Australia)

Considerable Advantages to Offset Accounts in Tax and Growth Areas

Newspaper article The Observer (Gladstone, Australia)

Considerable Advantages to Offset Accounts in Tax and Growth Areas

Article excerpt

Noel Whittaker

Financial Expert

EVEN though offset accounts are one of the most useful investment tools you can have, very few people understand them. If you deposit money in a normal account you will probably earn less than 2% per annum and then lose nearly half of that in tax. However, when you deposit your money in an offset account the notional interest credited should be the same as that charged on the housing loan.

But it gets even better; instead of being credited to your account and leaving you liable for tax, it is taken off the interest on your non-deductible home loan. Therefore funds in an offset account earn you the equivalent of the loan rate (currently around 7%) after tax.

That's equivalent of getting 12% before tax on an interest-bearing deposit.

You can put offset accounts to good use if you intend to change residences and retain the old one.

Think about two neighbours who started with a housing loan of $300,000 some years ago. …

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