A Guide to using your Offset Account as an Australian Expat

For many Australians living abroad, managing property back home remains a crucial part of their financial strategy. If you own property in Australia and have an offset account linked to your mortgage, it can be a powerful financial tool to support broader wealth-building goals.

In this guide, we’ll explore the benefits and strategies for using your offset account as an Australian Expat to help grow your wealth while living overseas.

What Is an Offset Account?

An offset account is a transactional bank account linked to your home loan or investment loan. The Cash balance in this account is "offset" daily against your mortgage balance, reducing the interest charged on your loan. For example, if you have a $500,000 mortgage and $50,000 in your offset account, you’ll only pay interest on $450,000.

For Australian Expats, the benefits of offset accounts remain the same, yet the opportunities can often be greater when paired with a well-thought-out investment strategy.

Why Offset Accounts Still Work for Australian Expats

Many Expats assume they need to restructure their loans or accounts when they move abroad. The truth is, using your offset account as an Australian Expat can still be highly effective. As long as the account remains linked to your Australian mortgage, you’ll continue to benefit from reduced interest and greater flexibility.

Benefits of using an Offset Account:

Tax efficiency: Unlike savings accounts, the money in your offset account isn’t earning interest; it's saving you interest. Interest earned in a savings account is subject to taxation in Australia, whereas interest saved in your offset account is not.

Liquidity: Unlike redraw facilities, offset accounts give you easy access to funds, like a regular transaction account, which is helpful for investment or emergencies while living overseas.

Mortgage savings: Every dollar in the offset account reduces your loan interest, helping you pay down your loan faster.

Strategies to Grow Wealth using your Offset Account as an Australian Expat

1. Build a Cash Buffer

As an Expat, maintaining a cash reserve in Australian dollars is important to meet any expenses in Australia, acting as an emergency fund. Life abroad can come with unexpected expenses such as emergency travel, currency shifts, or job changes. Keeping those funds in your offset account lets you stay prepared without sacrificing your mortgage efficiency.

2. Redirect Rental Income

If you’re renting out your Australian property, consider directing the rental income directly into your offset account. This tactic reduces your loan interest while keeping the funds liquid and ready for future opportunities.

3. Use it as a base for Investing

Your offset account can play a role in a boarder investment plan. One powerful way of using your offset account as an Australian Expat is to draw funds from it to invest in growth assets, such as shares or ETFs. While this will reduce your offset balance, meaning you'll pay more interest on your mortgage, the trade-off can be worth it. Here’s why:

Capital growth & dividends: Shares can provide both long-term capital growth and regular dividend income, which can be tax-effective depending on your residency status. Australian Expats who are non-residents for tax purposes can invest in Shares without being liable for capital gains tax (CGT) with the Australian Tax Office (ATO). Dividends also receive favourable treatment for non-residents, with a tax rate of between 0% and 30%, depending on whether they are franked or unfranked.

Compounding returns: Unlike the interest savings in your offset account, shares can offer compounding returns to further accelerate the growth of your investments. Compounding returns occur when the profits you earn from your share investment, such as dividends or capital gains, are reinvested to generate additional returns over time. Instead of taking the profits out, you let them stay invested, which means your money starts earning returns on both the original amount and the accumulated gains.

Tax-deductible interest: When funds are withdrawn from your offset account, the interest on the equivalent amount of your mortgage becomes tax-deductible. This strategy can reduce your Australian taxable income from sources such as rental income or other local income.

Important Considerations for Australian Expats

Check account access: Ensure you can operate your offset account online or via international banking.

Watch for residency issues: Some banks may have policies about non-resident account holders. Confirm that your offset account remains compliant with your bank’s terms.

Understand tax implications: Non-residents for tax purposes face different rules. Work with a Tax Accountant and Financial Adviser who understands expat finances to ensure your strategy is tax-efficient.

Conclusion

Using your offset account as an Australian Expat isn’t just about saving mortgage interest; it’s about using a flexible financial tool to support broader wealth-building goals. With a proactive approach, your offset account can help you stay financially agile, reduce risk, and make smarter investment choices from anywhere in the world to grow your wealth.

Runway Wealth Management is the trusted Financial Adviser to the Australian Expat community. Our tailored advice is backed by expertise, education and experience, which allows us to be at the forefront of Australian Expat Financial Planning.

If you would like to speak to one of our Expat Financial Advisers about this blog or if you have other queries, we would be more than happy to speak with you. Feel free to send us an enquiry through the ‘Contact Us’ tab provided in the link below:

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General Advice Disclaimer: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.