 What is an offset account?
An offset account is a separate account to your home loan, which is linked in the banks computer systems, so that the balance held in the offset account, is daily, offset against the interest accruing on your home loan. For example, if you set $10,000 into your home loan offset account for a month, on a loan of 6.90% interest, you would save around $57 interest for that month. The effect of placing this amount directly into the redraw account of the loan is exactly the same (for a variable loan) interest savings. Why use an offset and not redraw 100% offset accounts are normally easier to access, and can be run as transaction accounts for your income, bills, and other needs. Some banks offer unlimited offset accounts where you can run lots of offset accounts against the same home loan. Offset accounts also help you to quarantine the extra repayments. Further to this, they may offer you savings in future should you decide to turn an owner occupied home loan into an investment, read more on this here. Why do offsets and fixed rates not mix The banks do not have functionality to offer offset accounts on fixed rates. This is largely because fixed rates are bought at set wholesale prices for and paid for in advance. Any offset made against this would be a loss by the bank and therefore is not a financially viable product for the banks. Why not just put my money into a savings account or term deposit and earn interest? When you 'save' money in terms of less interest, the tax office doesn't ask for a slice of your savings. However, the moment you put money into an interest bearing account, you will need to declare this in your tax return and are likely pay tax on it at your top marginal tax rate. For many this is 32c in the dollar, so your savings are quickly eroded by the tax man. How do I get an offset account
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 It's tax time so in order to get ready for lodging your return we have a handy guide to assist you with getting your documents ready. Many of your financial and services providers will send you end of year statements so simply file them all as they come in. For accounts you can easily access summaries online for end of financial year fees and interest charges, for both interest paid and interest earned. INCOME DOCUMENTS Group certificate / Payment Summaries from employers Lump sum / Termination Payment Summaries Government payment statements Interest income statements for savings accounts etc. Dividend statements Annual statements for managed funds income Rental property statements Business income reports Foreign Income Capital Gains records (Contracts of sale for goods sold) EXPENSE DOCUMENTS Work Expenses and receipts Depreciation reports on properties Donations to charities receipts Income protection statements Receipts for works, repairs, or purchases for rental properties Interest and fees charges on any investment or business loans Health Insurance statement OTHER Tax File Number Identification & Medicare Number BSB and Account number for your refund As we welcome in a new financial year we thought it was time to take a look at what the experts are forecasting for the year ahead.
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AuthorLiz Wilson has been working in finance for twenty two years now. She regularly blogs on industry topics and here you will find over a hundred personally written blog topics and case studies... 
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