Every offset-versus-invest argument runs aground on the same problem: nobody knows what the share market will do. So stop guessing. Fix the outcome instead, and solve for the input — the return an ETF would need, the mortgage rate that would tip it, the years required. You end up with a threshold you can actually judge, rather than a forecast you have to believe.
A normal calculator asks you to enter an expected return, then shows you a number. The trouble is that the number inherits all the uncertainty of your guess, while looking precise. Enter 8% and you get $578,166. Enter 5% and you get $288,213. Both are displayed with the same confident authority, and neither tells you which assumption was reasonable.
Worse, the assumption tends to be chosen to justify a decision already made. Someone who wants to invest picks 9%; someone who wants to pay down the mortgage picks 5%. The calculator obediently confirms whatever they brought with them.
Here is the breakeven ETF growth rate needed to produce the highest calculated gain of the five options, at various mortgage rates. Everything else is held at the calculator's defaults: $100,000, 25 years, 32.5% marginal rate, 3.8% dividends, 3% inflation, current 50% CGT discount.
| Your mortgage rate | ETF capital growth needed | Verdict |
|---|---|---|
| 5.0% | Already ahead | ETF leads on any reasonable assumption |
| 6.0% | Already ahead | ETF leads |
| 6.5% | Already ahead | ETF leads |
| 7.0% | Already ahead | ETF leads |
| 8.0% | 8.05% | Roughly the long-run average — a coin toss |
| 9.0% | 9.21% | Above long-run average — demanding |
| 10.0% | 10.33% | Well above average — a stretch |
Capital growth required, in addition to the assumed 3.8% dividend yield. Calculated gain comparison only, not a recommendation.
This is a far more useful output than a projection. At a 6.5% mortgage, the ETF does not need heroic assumptions — it leads on ordinary ones. At 10%, it needs sustained capital growth above 10% on top of dividends, which is demanding by any historical standard. You do not need a market forecast to form a view on those two statements.
The same solver runs in the other direction. Holding the ETF at 8% growth, here is the mortgage rate an offset account would need to produce the highest calculated gain:
| Your marginal tax rate | Mortgage rate offset would need |
|---|---|
| 19% | 8.35% |
| 32.5% | 7.96% |
| 37% | 7.82% |
| 47% | 7.52% |
25-year holding period. The threshold falls as tax rises because offset savings are never taxed.
The threshold drops as your tax rate climbs — from 8.35% to 7.52% — because a tax-free benefit becomes more valuable the more tax you would otherwise pay. If you are on the top marginal rate with a mortgage above about 7.5%, the offset account becomes competitive on these assumptions without needing any pessimism about markets.
Vary the assumed ETF growth rate and watch what happens to the offset breakeven:
| Assumed ETF growth | Mortgage rate offset needs | What is actually blocking it |
|---|---|---|
| 5% | 7.36% | Gold |
| 6% | 7.36% | Gold |
| 7% | 7.36% | Gold |
| 8% | 7.96% | ETF |
| 9% | 8.82% | ETF |
| 10% | 9.70% | ETF |
Gold assumed at 8% growth throughout. The breakeven plateaus because a different competitor becomes binding.
Below 8% ETF growth, the number stops moving — because the ETF is no longer the option to beat. Gold is. Lowering your ETF assumption further changes nothing, since the offset account still has to clear gold's $489,810 to lead the field.
This is exactly the kind of thing a single-pair comparison hides. Arguing about whether shares will return 6% or 7% is beside the point if a third option is setting the bar. Comparing all five options at once is what makes the constraint visible.
Every figure so far ranks by raw projected gain, which quietly treats a guaranteed saving and a volatile market return as the same kind of number. The calculator's optional risk-adjusted view applies a haircut to riskier options as a tie-breaker. The breakeven figures move a long way:
| Mortgage rate | ETF growth needed — nominal | ETF growth needed — risk-adjusted |
|---|---|---|
| 5.0% | Already ahead | Already ahead |
| 6.5% | Already ahead | 8.43% |
| 7.0% | Already ahead | 9.07% |
| 8.0% | 8.05% | 10.29% |
| 9.0% | 9.21% | 11.47% |
The risk haircut is a simplified illustrative tie-breaker, not a volatility model or a measure of actual risk.
At a 6.5% mortgage the ETF goes from "already ahead" to needing 8.43% growth. At 8% it needs 10.29%. Whether you accept the haircut is a judgement about how much certainty is worth to you — but the comparison makes the cost of that judgement explicit rather than burying it.
"How long until extra super contributions come out ahead?"
On default assumptions, they do not — not within 25 years. Super climbs from −$2,289 at five years to $210,428 at twenty-five, but the ETF reaches $578,166 over the same period. Super's concessional 15% earnings tax does not overcome the 15% contributions tax paid on entry plus the ETF's untaxed compounding. That is a clearer answer than any projection, and it points at the real reasons to contribute — the upfront tax deduction and preservation discipline — rather than raw calculated gain.
"Could dividends alone close the gap if capital growth disappoints?"
With capital growth at 5%, an ETF would need a dividend yield of 8.29% to lead. That is far above the Australian market's typical range, so the honest answer is no — dividends cannot rescue a weak growth assumption.
"What term deposit rate would I need?"
About 11.79% over 25 years, on default assumptions. Australian term deposits have not paid that since the early 1990s. This is a useful reality check: no plausible term deposit rate wins a long comparison, because interest is taxed at your full marginal rate every single year and never gets to compound untaxed.
A breakeven figure is still built on assumptions — it simply moves the uncertainty somewhere more visible. Solving for ETF growth still requires assumed dividends, inflation, tax rate and holding period, and being wrong about those moves the threshold.
It also says nothing about sequencing risk. Two portfolios with identical average returns can end very differently depending on when the bad years fall — a factor no single-rate model captures. And it cannot tell you whether you would actually hold through a 40% drawdown, which is usually the difference between a modelled return and a real one.
What breakeven analysis does well is narrow. It converts an unanswerable question — "what will markets do?" — into a judgeable one: "is this specific number plausible?" That is a smaller claim than a projection makes, and a more honest one.
On the default assumptions used here, not quite — an offset account needs about 7.96% at a 32.5% marginal rate to lead over 25 years. At a 47% marginal rate the threshold drops to about 7.52%. Under the risk-adjusted view, 7% is already enough. Your own inputs may move it either way.
Because ranking by raw projected gain implicitly assumes every dollar of projected return is equally certain. The risk-adjusted view drops that assumption. The size of the shift is a measure of how much of the growth options' advantage depends on their risk being ignored.
Yes. The years lever answers "how long would I need to hold for this option to lead?" On an 8% mortgage with default assumptions elsewhere, the offset account overtakes the ETF at year 23 — though by a margin of about $100, which is effectively a tie.
No. It is a calculation tool that shows how outcomes respond to assumptions. It does not know your income security, other debts, insurance, estate plans, family circumstances or risk tolerance, and it cannot weigh them. For decisions that matter, speak to a licensed financial adviser or registered tax agent.