What an offset account does

An offset account is a cash account linked to a loan. The lender charges interest on the loan balance less the offset balance. So cash in the account lowers the interest, while the debt stays the same. The position shows the debt in full and the cash in full. It shows the debt after offsets as the difference.

What it does to interest

Each dollar in the offset saves interest at the loan's rate. The saving is the same for a fixed or a variable loan, and for interest only or principal and interest.

On a loan with a linked offset, the offset balance lowers the debt after offsets. The monthly interest on the loan page is worked out on that figure. So the offset balance needs a date, like any other record. A balance from months ago overstates the saving.

On the position

Portfolio position keeps the debt and the cash apart. The debt is what is owed to the lender, and it does not shrink because cash sits beside it. The cash is still yours to spend.

The debt and offsets panel shows the balance, the linked offsets and the debt after offsets. So you can read both, and neither is hidden inside the other.

In the cashflow and the forecast

The current cashflow works out interest on the debt after offsets. So a growing offset shows up as lower interest, month by month.

The cash forecast sends surplus cash into the account you choose for each owner. In an offset, the return is the loan rate, untaxed. Which account gets the surplus is a setting on the forecast, not a record.

The records that make it work

Link the offset to its loan on the loan page, with the date the link started. Record the offset balance with its date. When the loan is refinanced, the link ends on the old loan and starts on the new one. Then the interest history splits correctly at the switch.