CGT basis: this calculator models the law as it stands before 1 July 2027. It applies the 50% CGT discount to share gains held over 12 months (33.3% for super).
From 1 July 2027 that discount is replaced, for individuals, by CPI cost-base indexation plus a 30% minimum tax on the net gain — enacted law, Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49) and Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 (Act No. 50), Royal Assent 26 June 2026. The 50% discount survives for CGT events before that date, by election for eligible new residential dwellings, and the affordable housing discount of up to 60% is retained.
What this means for your result. This tool does not apportion the gain across 1 July 2027, so for any horizon ending after that date it understates the CGT on the shares side, which flatters shares relative to the offset account. The longer the horizon, the larger the gap: on a $100,000 parcel growing at 8% at a 32% marginal rate, the shortfall is about $2,800 over 5 years, $8,800 over 10 and $64,000 over 25 — roughly 37%, 47% and 68% more CGT than shown here. This calculator’s default horizon is 25 years.
For a comparison that apportions the gain across the reform date and applies the 30% floor, use the Property vs Shares calculator, whose engine models both regimes.
Enter your assumptions and press Calculate.
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 | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | ||
Disclaimer: Simplified annual model. Not financial advice. Consult a licensed adviser.
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.
The hurdle rate formula (and why it's a heuristic, not a hard rule)
The offset earns your mortgage rate guaranteed and tax-free. The simple break-even formula is:
Hurdle = Mortgage Rate ÷ (1 − Marginal Tax Rate)
At 6% mortgage and 37% tax: 6% ÷ 0.63 ≈ 9.5% gross p.a.
However, this formula overstates the required share return for a PPOR. It assumes all investment returns are taxed in full every year — like a savings account. Shares aren't: capital gains are deferred until you sell and then receive a 50% CGT discount if held more than 12 months (the 50% discount is the basis for CGT events before 1 July 2027; from that date it is replaced for individuals by CPI cost-base indexation plus a 30% minimum tax under Acts No. 49 and 50 of 2026, which this calculator does not model — see the note above the results), and franking credits from Australian companies partially offset dividend tax. These two factors significantly reduce the effective tax drag, making the real break-even return well below the formula's result. For an IP (where mortgage interest is deductible), the formula is accurate in reverse — the offset's real after-tax benefit is rate × (1 − tax), a much lower bar for shares. The simulation uses year-by-year FIFO CGT and franking credit modelling — trust its output over the hurdle heuristic.
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. This is the pre-1 July 2027 basis. From that date the discount is replaced for individuals by CPI cost-base indexation plus a 30% minimum tax (Acts No. 49 and 50 of 2026, enacted). This calculator does not model that change — see the note above the results.
- Offset: interest saving is tax-free — no income recognised. This is the core advantage.
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