Extra repayments give a guaranteed, tax-free return equal to your mortgage rate. Shares can return more — but dividends are taxed each year and capital gains are taxed on sale. This compares both, after tax, to your retirement age — using the 2026-27 budget rules (including the CGT reform).
Your situation
Your mortgage
Same rate benefit, but stays accessible
If you invested instead (shares / ETFs)
Price growth p.a., before fees
% of dividends franked
Platform / management, p.a.
For post-2027 CGT indexation
Off = compare balances before any sale
Spare cash to deploy
After-tax — the same into each option
After 20 years, at age 60
Investing comes out ahead by $113,407
Offset / repay
$445,616
Guaranteed 6.0% tax-free
Invest (after tax)
$559,023
~8.5% p.a., taxed
Wealth added by your spare cash, year by year
Extra wealth each choice builds vs. spending the cash — the growing gap is the difference between them.
Year-by-year balances
The actual loan owing and share portfolio under each choice.
| Year | Pay down mortgage | Invest instead | ||
|---|---|---|---|---|
| Owing | Shares | Owing | Shares | |
| 2026 | $482k | $0 | $494k | $12k |
| 2027 | $462k | $0 | $487k | $25k |
| 2028 | $442k | $0 | $480k | $39k |
| 2029 | $420k | $0 | $472k | $55k |
| 2030 | $397k | $0 | $464k | $71k |
| 2031 | $372k | $0 | $456k | $89k |
| 2032 | $346k | $0 | $447k | $109k |
| 2033 | $319k | $0 | $437k | $131k |
| 2034 | $289k | $0 | $427k | $154k |
| 2035 | $258k | $0 | $417k | $179k |
| 2036 | $226k | $0 | $405k | $207k |
| 2037 | $191k | $0 | $393k | $237k |
| 2038 | $154k | $0 | $381k | $269k |
| 2039 | $115k | $0 | $367k | $304k |
| 2040 | $73k | $0 | $353k | $342k |
| 2041 | $30k | $0 | $338k | $384k |
| 2042 | $0 | $17k | $322k | $429k |
| 2043 | $0 | $67k | $305k | $478k |
| 2044 | $0 | $121k | $286k | $532k |
| 2045 | $0 | $180k | $267k | $589k |
| Less CGT on sale | — | −$1k | — | −$30k |
| Net after CGT | $0 | $178k | $267k | $559k |
Owing = loan balance; Shares = portfolio value (before any CGT on sale). In the pay-down column the loan clears first, then that freed cash starts the share pot.
The investing side, after tax
Portfolio value at retirement
$589,451
Effective dividend tax each year
80% franked at 30% marginal
6.0%
Capital gains tax on sale
Post-2027 gains: CPI-indexed, 30% floor
−$30,427
Net after tax
$559,023
Tax on the investing option, year by year
Dividends are taxed every year at your marginal rate (less franking credits). Capital gains tax builds up as the portfolio grows — you pay it when you sell.
| Year | Dividend income tax | CGT if sold |
|---|---|---|
| 2026 | $0 | $0 |
| 2027 | -$30 | -$79 |
| 2028 | -$63 | -$246 |
| 2029 | -$98 | -$511 |
| 2030 | -$137 | -$884 |
| 2031 | -$179 | -$1,377 |
| 2032 | -$225 | -$2,002 |
| 2033 | -$274 | -$2,772 |
| 2034 | -$328 | -$3,704 |
| 2035 | -$387 | -$4,812 |
| 2036 | -$450 | -$6,115 |
| 2037 | -$519 | -$7,632 |
| 2038 | -$594 | -$9,384 |
| 2039 | -$676 | -$11,393 |
| 2040 | -$764 | -$13,686 |
| 2041 | -$860 | -$16,288 |
| 2042 | -$965 | -$19,229 |
| 2043 | -$1,078 | -$22,543 |
| 2044 | -$1,202 | -$26,263 |
| 2045 | -$1,336 | -$30,427 |
| Total tax | -$10,167 | -$30,427 |
CGT here is what you'd owe if you sold that year: cost base indexed to CPI, a 30% minimum rate, no 50% discount (post-2027 rules) — which is why it looks lighter than the old discount method. Total tax over 20 years: $40,594.
Your assumed net investment return (~8.5%) beats your 6.0% mortgage rate, so investing wins on paper. But the mortgage return is guaranteed — shares carry real risk of doing worse. Your extra repayments would clear the loan around 2043.
Illustrative only. Assumes dividends reinvested, constant rates, and the same after-tax amount into each option. Ignores CGT nuances on year-one contributions and any change to your mortgage rate.
Why is my mortgage a "guaranteed return"?
Every extra dollar off the loan saves you the interest you would have paid on it — compounding at your mortgage rate, with no tax and no risk. To beat it, an investment has to earn more than your mortgage rate after tax and fees. That is a higher bar than it looks.
How is the investment taxed?
Dividends are taxed each year at your marginal rate, reduced by franking credits (fully-franked dividends are roughly tax-free for a 30% taxpayer, and a refund for lower earners). Capital growth isn't taxed until you sell — then CGT applies. From 1 July 2027 the 50% discount is replaced by CPI indexation with a 30% minimum tax on the gain.
Does an offset account change the answer?
Financially, money in an offset saves the same interest as an extra repayment — but it stays accessible. That flexibility is why many people prefer an offset to locking cash into the loan via extra repayments (which need redraw to get back).
What about risk?
This calculator uses a fixed assumed return. Real share returns vary year to year and can be negative. The mortgage side has no such risk — that certainty has real value, especially close to retirement.
See this across your whole financial life
WealthSpan models offset, extra repayments, shares, dividends, CGT and super together — year by year to retirement, with two scenarios side by side.
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