How an offset actually works
An offset is a transaction account linked to your loan. When the bank calculates daily interest, it charges you on loan balance minus offset balance. With $30,000 offset against a $550,000 loan at 5.75%, you're charged interest on $520,000 — saving $1,725 in the first year. Your repayment stays the same, so that saving quietly becomes extra principal reduction, compounding for the rest of the loan.
Better than a savings account — for most people
Interest "earned" by an offset is really interest not paid, so it's tax-free. A 5.75% offset beats a 5% savings account even before tax; after tax at a 30% marginal rate, that savings account is really earning 3.5%. The higher your tax bracket and mortgage rate, the more lopsided the comparison gets.
The fee trap
Offsets usually come inside a "package" loan costing $248–$395 a year, often with a slightly higher rate than a basic loan. The break-even is simple: fee ÷ interest rate. At 5.75%, a $395 fee needs about $6,900 sitting in offset year-round just to break even. If your buffer is small or you'd genuinely leave the money untouched, a basic loan with free redraw often wins. If you hold $20,000+ of savings and salary float, the offset wins comfortably — the calculator above nets it out for you.
Getting the most from it
Have your salary paid straight into the offset, run daily spending from a credit card paid in full monthly, and keep every buffer — emergency fund, holiday savings, tax set-asides — in the offset rather than a separate savings account. Every dollar, every day, counts against the loan balance.