Offset vs Shares Calculator 2025 (Australia)

We model dividends (with franking), sales to fund extra mortgage interest, CGT on sales, reinvestment of surplus dividends, and final liquidation after CGT.

Summary

Enter your assumptions and press Calculate.

Portfolio vs Offset over time

Year-by-Year Breakdown

Detailed annual results including dividends, sales, and ending values.

Year Start Value ($) Dividends (after tax) ($) Interest Required ($) Units Sold Sale Gross ($) Sale Tax ($) End Value (pre-tax) ($) End Value (after CGT) ($)

How this offset vs shares model works

This tool compares the after-tax outcome of keeping cash in your mortgage offset versus investing the same cash in shares. Pulling money from your offset increases the mortgage interest you must pay. Each year we first use after-tax dividends to fund that extra interest; if it’s still short, we sell just enough units (FIFO) and apply CGT where eligible. Any surplus dividends are reinvested. At the end, we liquidate the portfolio and show after-CGT cash for an apples-to-apples comparison with the offset baseline.

Quick start

  1. Enter your offset amount, mortgage interest rate, and investment period.
  2. Set your tax settings: marginal tax rate, CGT discount, and franking treatment.
  3. Choose share assumptions: dividend yield and capital growth.
  4. Click Calculate and review the chart and year-by-year breakdown.

What each control does

  • Amount in offset: the cash you could invest instead. Staying in offset saves interest tax-free.
  • Mortgage rate: the “hurdle” return for shares; higher rates make offset more attractive.
  • Investment period: number of years we simulate before the final liquidation.
  • Marginal tax rate: applied to dividends (after franking credits) and realised capital gains.
  • CGT discount: typically 50% in AU for assets held ≥ 12 months.
  • Franking credits: options for fully/partially franked or none; affects after-tax dividends.
  • Dividend yield: cash income before tax; used first to fund extra mortgage interest.
  • Capital growth: price change used to revalue the portfolio each year.

Behind the math (step by step)

  1. Compute extra mortgage interest due to removing the offset cash.
  2. Gross-up dividends for franking, tax at your marginal rate, then net back to after-tax cash.
  3. Use after-tax dividends to pay the extra interest. If short, sell just enough units (FIFO) and apply CGT (with discount if eligible).
  4. Reinvest any surplus dividends at year-end, then apply capital growth to end-of-year value.
  5. At the end of the period, liquidate and apply CGT to show after-CGT proceeds.

Interpreting the outputs

  • Portfolio vs Offset over time: portfolio value trajectory versus the offset baseline.
  • Year-by-year table: shows dividends after tax, extra interest required, units sold, sale tax, and ending values (pre- and post-CGT).
  • Final outcome: compares after-CGT portfolio cash to the offset baseline to see which path wins.

Worked examples

  • Offset likely wins: 6.5% mortgage, 4% dividend (fully franked), 5% growth, 37% tax → high hurdle makes offset hard to beat.
  • Shares can win: 5.5% mortgage, 5% dividend (part-franked), 7% growth, 34.5% tax → after-tax total return can exceed the mortgage rate.

Limitations & assumptions

  • Ignores brokerage, ongoing fees, and exact daily interest accrual/rounding differences.
  • Uses annual steps (dividends taxed annually; CGT when units are sold).
  • Assumes availability of liquidity and no contribution withdrawals during the period.
  • Tax rules can change; personal circumstances vary.

Glossary

  • Franking credits: company tax already paid, credited against your dividend tax.
  • CGT discount: reduction in taxable gain for long-held assets (e.g., 50% in AU ≥ 12 months).
  • FIFO: First-In First-Out lot selection for realising capital gains.

Related tools

FAQs

When does the offset usually win?

When your mortgage rate is high compared to your expected after-tax return from shares (dividends + growth net of CGT on sales).

Do you assume DRP?

We reinvest any surplus dividends at year-end (similar to DRP), but first use dividends to fund extra mortgage interest.

Why liquidate at the end?

To surface after-CGT cash—what you can actually pocket—so the comparison with offset is apples-to-apples.

Disclaimer: This tool provides general information only and does not account for your personal objectives, financial situation or needs. Consider seeking independent advice. See our full terms & disclaimer.