Should I put money in a mortgage offset account or invest in shares in Australia?

The offset account earns your mortgage interest rate — tax-free and risk-free. To beat it in shares you must earn enough to cover income tax on dividends and CGT on gains. The formula is: hurdle rate = mortgage rate divided by (1 minus your marginal tax rate). At a 6% mortgage and 37% marginal rate, shares must return over 9.5% p.a. after fees. This calculator compares both strategies with your own numbers including Monte Carlo for shares uncertainty.

What is cashflow neutrality in an offset vs shares comparison?

Cashflow neutrality means all three scenarios cost the same amount per year out of pocket, making them genuinely comparable. The anchor is Scenario B's full P&I repayment. Scenario A invests the repayment saving into shares each month. Without this constraint you would be comparing different levels of financial commitment, not different strategies.

What is the hurdle rate for offset vs shares in Australia?

The hurdle rate is the minimum pre-tax share return required to match the guaranteed, tax-free return of an offset account. Formula: Hurdle = Mortgage Rate divided by (1 minus Marginal Tax Rate). At 6% mortgage and 32% tax the hurdle is 8.8%. At 37% tax it is 9.5%. At 45% tax it is 10.9%.

How do franking credits affect the offset vs shares comparison?

Franking credits attach to fully franked dividends from Australian companies. Individuals can claim them as a tax offset or refund. Super funds at 15% tax rate receive a large portion back as cash. This materially improves the after-tax return of Australian shares versus the theoretical hurdle rate.

What is the Power Play scenario in the offset calculator?

Power Play puts a lump sum into the offset account and maintains the original full P&I repayment. Since less interest is charged each month, the entire interest saving goes directly to principal — a compounding snowball that can reduce a 25-year loan by 8 to 12 years with no extra cash outlay. It is the maximum guaranteed risk-free outcome.

Can I use a super fund tax rate in the offset vs shares calculator?

Yes. Select Super Fund (15%) as your investor type. The calculator applies a 15% dividend tax rate and 33.3% CGT discount for assets held over 12 months, significantly improving the after-tax share return compared to a 37% or 45% individual rate.

Offset vs Shares Calculator 2026 (Australia)

Four cashflow-neutral scenarios: keep more cash flow, aggressively pay down debt, or invest everything in shares. Monte Carlo, FIFO CGT, franking credit refunds, and super fund tax rates.

A Cashflow Saver (IO) — Offset + interest-only repayments for IO cap period, then P&I revert

B Power Play (P&I) — Offset + keep original P&I repayments, accelerate loan paydown

C No Offset / Invest — Invest lump sum in shares or HISA, standard P&I mortgage with no offset

D Balanced (P&I on offset bal.) — Offset + P&I on effective balance (lower repayment), invest small freed cashflow

Winner

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After CGT & all costs

A Cashflow Saver (IO)

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Offset + shares + loan equity (same formula)

B Power Play (P&I)

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Offset + loan equity (same formula)

C No Offset / Invest

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Shares + loan equity (same formula)

D Balanced (P&I on offset bal.)

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Offset + shares + loan equity (same formula)

Interest Saved (A)

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Cumulative offset benefit

Enter your assumptions and press Calculate.

A: Cashflow Saver (IO) B: Power Play (P&I) C: No Offset / Invest D: Balanced (P&I on offset bal.)

Run a calculation to see the analysis.

300 random market paths (lognormal returns, OU interest rates). Shows how each strategy performs across good, median, and bad markets.

Centred on your actual inputs. Each cell sweeps ±2 steps around your mortgage rate and share growth rate.

Run a calculation to see the grid.

Yr	A: Cashflow Saver (IO)							B: Power Play (P&I)						C: No Offset / Invest							D: Balanced (P&I on offset bal.)							Lead
Yr	Loan	Interest	Principal	Repayment	Loan Repaid	Shares	Net Worth	Loan	Interest	Principal	Repayment	Loan Repaid	Net Worth	Loan	Interest	Principal	Repayment	Loan Repaid	Shares	Net Worth	Loan	Interest	Principal	Repayment	Loan Repaid	Shares	Net Worth	Lead

How this four-scenario model works

This calculator simulates four fundamentally different strategies for deploying a lump sum of money, all starting with the same initial cash and the same annual out-of-pocket cost — making them genuinely comparable.

Cashflow Neutrality (the key principle)

The anchor is Scenario B's annual repayment — the original full P&I payment on your loan. All four scenarios cost the same per year out of pocket. Scenario A invests the repayment saving into shares. Scenario C pays the same as B in mortgage repayments. Without this constraint, you'd be comparing apples to oranges.

The four scenarios

A — Cashflow Saver: Lump sum into offset. Repayment reduced to interest-only on the effective balance (loan minus offset). Loan principal is never reduced. The repayment saving vs Scenario B is invested in shares each year — two simultaneous income streams: guaranteed tax-free interest saving + market returns. Wealth = offset cash + cumulative interest saved + share portfolio.
B — Power Play: Lump sum into offset. Original full P&I repayment maintained. Since less interest is charged, every cent of interest saved goes directly to principal — a compounding snowball that can shave 8–12 years off a 25-year term. Maximum guaranteed, risk-free outcome. Wealth = offset cash + extra loan equity paid down vs starting position.
C — Share Investor: Lump sum goes directly into shares. Standard P&I repayment on the unchanged loan. All dividends (after franking credit adjustment) reinvested. Maximum market exposure, highest expected ceiling, most volatile. Wealth = share portfolio after CGT and brokerage.
D — Balanced Investor: Lump sum into offset. Continue normal P&I repayments on the effective balance (loan minus offset). Your required repayment is slightly lower than the full original P&I because less interest is charged. The modest freed cashflow is invested in shares each year. Loan reduces, offset works, and spare cashflow is deployed — the realistic middle ground between A and B. Wealth = offset cash + after-tax interest saved + share portfolio + extra equity vs C.

What the wealth figures compare: Home equity is deliberately excluded from all three scenarios. All three borrowers own the same property — it cancels in any comparison. The calculator measures only the marginal wealth gain from how you deploy the lump sum. If you want to include property equity, simply add your expected home value minus your loan balance to each scenario equally.

The hurdle rate formula

The offset earns your mortgage rate guaranteed and tax-free. To match it in shares:
Hurdle = Mortgage Rate ÷ (1 − Marginal Tax Rate)
At 6% mortgage and 37% tax: hurdle = 6% ÷ 0.63 ≈ 9.5% gross p.a. — a high bar that shares must clear after dividends, CGT, and MER.

Monte Carlo methodology

Share returns: lognormal distribution. The log-mean is set so the median compound return equals exactly your CAGR input. This avoids overstating expected outcomes (arithmetic mean bias).
Interest rates: Ornstein-Uhlenbeck (mean-reverting) process. Rate shocks decay back toward your base rate. Clamped to 0.5%–15% to avoid nonsensical paths.
300 simulations. Win % = share of paths where each scenario has the highest terminal wealth.

Tax treatment

Dividends: grossed up for franking credits. If credits exceed your tax liability (e.g., super fund, low income), the excess is treated as a cash refund.
CGT: FIFO lot selection. 50% discount for assets held >12 months (individual). 33.3% for super. Applied at final liquidation.
Offset: interest saving is tax-free — no income recognised. This is the core advantage.

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Disclaimer: Simplified annual model. Not financial advice. Consult a licensed adviser.