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Why does everybody rave about 100% offset accounts?

22/7/2015

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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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Handy Tax Checklist

9/7/2015

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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


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Outlook for the New Financial Year

8/7/2015

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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.

Overall, the economy is likely to have posted below-average growth of 2.5 per cent in 2014/15 though CommSec expects the record economic expansion to continue in 2015/16 with growth lifting to around 3.0 per cent.

For the second consecutive year, residential property, shares and bonds all increased over 2014/15 – widely considered a rare event. Returns on dwellings grew by around 13.3%. Sydney has been the market leader in growth, followed by Melbourne.

According to Corelogic RP Data, national market research experts, mortgage rates are expected to remain low. Obtaining a mortgage may become more difficult however as lenders make changes to lending policies which we have already seen. Lenders are lowering discounts and increasing deposits required for investment lending. The lenders measure for living expenses is going up, and the buffers used for existing and new debt has crept up also. We expect to see more of this from more lenders in the new financial year.

RP Data has forecast that the property market growth is expected to continue with of slower growth later in the year, as supply continues to trend beyond current record highs.

Other property markets in Australia are beginning to see the first signs of growth. Newcastle and Wollongong are both currently benefiting from their proximity to Sydney.

Sectors of the market in Brisbane, The Goldcoast and Sunshine Coast are also showing positive indicators for growth. RP Data suggest affordability in the Sydney and Melbourne markets may drive more buyers to these areas.

A decline in both the Perth and Darwin property markets has been linked to the resource sector. Key indicators in these markets include slowing value growth or falling home values, decreasing rental rates, declining sales and marked increase in the level of discounting to attract buyers.

RP Data concluded a mixture of market conditions across the country for this financial year. Sydney and Melbourne have been touted to continue as market leaders.


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    Author

    Liz 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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  • About Us
    • Why Use Us?
    • Testimonials
    • In The Community >
      • FOWAS Dog Training
      • 2024 Southern Highlands Biggest Bake Off
      • 2023-southern-highlands-biggest-bake-off
    • Our Team
    • Enquiries
    • Privacy Statement
  • Home Loans
    • Investment Loans
    • Calculators >
      • Stamp Duty Calculator
      • Income Tax Calculator
      • Borrowing Power Calculator
      • Budget Planner
      • Extra Repayment Calculator
      • Home Loan Offset Calculator
      • Property Selling Cost Calculator
      • Property Buying Costs Calculator
      • Hardship Contact Lines - Mortgages
      • Hardship Contact Lines - Equipment
    • Aussie Expats and Foreign Investors
    • Deposit Bonds
    • Medical Professionals
  • Cars & Equipment
    • Car, Truck and Equipment Finance
    • Get A Quote
    • Car Buying Service
    • Car Loan Application Online
    • Solar Finance
    • Car Buyers Guide
  • Financial Planning
  • General Insurance
  • Blog
  • Contacts
  • Vacancies
  • More
    • MyConnect
    • Resources
    • Newsletter Sign Up
    • Topic Sheet Library
    • Privacy Policy
    • Feedback
    • Glossary of Terms
  • Contact Us