A common question for doctors with a mortgage and growing surplus cash is:
Should I leave the money in the offset account or invest it?
At first glance, it looks like an investment question.
Compare the mortgage rate with the expected investment return and choose whichever is higher.
But that misses much of what matters.
The better starting point is:
What does this money need to do for me next?
Money in an offset reduces the interest charged on your home loan while generally remaining accessible.
Where home loan interest is not tax deductible, that saving can be particularly valuable because it is not taxable investment income.
But the offset’s biggest advantage may be flexibility.
It can provide capital for:
For a doctor approaching one of these transitions, access to capital can be as important as return.
Keeping too much money in cash indefinitely also has an opportunity cost.
Over longer periods, diversified growth investments offer greater growth potential, although returns are uncertain and capital values can fall.
Timeframe matters.
Money needed in two years for a property purchase has a very different job from money intended to build wealth over the next 20 years.
The same person may therefore have good reasons to keep some surplus cash in an offset while investing another part.
Suppose your mortgage rate is 6%.
Saving 6% of non-deductible mortgage interest is not the same as earning a 6% taxable investment return.
Investment income may be taxable, and capital gains may also eventually be taxed.
The ownership structure matters too. Long-term capital might be invested personally, through superannuation or through another appropriate structure, each with different tax, access and flexibility consequences.
The real question is whether the after-tax expected return is sufficient to justify the additional risk and reduced certainty.
Imagine you are planning to buy into a medical practice in two years.
Investing surplus cash may look sensible from a long-term wealth perspective.
Additional super contributions may also be attractive from a tax perspective.
But both decisions could reduce the capital available when the practice opportunity arrives.
Keeping more cash accessible may sacrifice some potential return today while preserving more options tomorrow.
The same issue can arise if you expect to:
A decision can be perfectly reasonable from a tax or investment perspective and still occur in the wrong sequence.
For many households, the answer is not 100% offset or 100% invested.
Surplus cash may have three different jobs:
Short-term capital for upcoming commitments.
Contingency capital for unexpected events or changes in income.
Long-term capital that can be invested because it is unlikely to be needed for many years.
Once the purpose of each dollar becomes clearer, the decision often becomes clearer too.
The objective isn’t to make every dollar work as hard as possible. It’s to make sure each dollar is doing the right job.
Before deciding where it should go, consider the decision across tax, lending and your longer-term financial plans.
We can help you work through how much should remain accessible, how much could be invested and how the decision fits with what you are planning next.
Talk to us about what your surplus cash should be doing next.
General information only. This information does not take into account your objectives, financial situation or needs. Tax, credit and investment decisions should be considered in light of your individual circumstances.
Tommy Li, CA
Director, Verity Advisory | Registered Tax Agent | Authorised Financial Adviser (ASIC Rep No. 1261831) | Member, Chartered Accountants Australia & New Zealand
Connect with Tommy on LinkedIn →
Tommy is a Chartered Accountant with 20+ years advising medical professionals on tax, financial structure and practice ownership decisions. He founded Verity Advisory to provide integrated advice for doctors at career-defining financial inflection points — combining tax, lending and financial planning into a single structured approach.
The draft trust rules offer an election with no restructure and no stamp duty \u2014 but the same percentages apply to capital. What doctors with practices in a family trust need to weigh up before choosing between the election and the roll-over.
Treasury has released draft law for a minimum 30% tax on family trust income from 1 July 2028. Here is what it says, what is excluded, the two ways out, and what doctors with trusts should do now.
GST credits expire four years after the original BAS due date \u2014 with no ATO discretion to extend. If activity statements have fallen behind, here is what is still saveable.