For many successful Australians, the wealth-building formula has been relatively straightforward. Build income, reduce non-deductible debt, invest sensibly and allow time to do the heavy lifting.
For those in the mining and resources sector, this often means directing bonuses, employee share scheme proceeds and surplus cash towards mortgages and investment loans. Along the way, offset accounts have become one of the most effective tools in the household balance sheet, reducing interest costs while preserving access to capital.
But as Australia’s tax landscape evolves, some investors may find themselves asking a different question.
Not simply how quickly they can repay debt. But which debt they should repay first.
Recent reforms to negative gearing and capital gains tax will apply to many future investment decisions from 1 July 2027. While existing arrangements will be covered under transitional rules, the changes alter some of the assumptions that have influenced investment decisions for decades.
Historically, many investors considered debt primarily in terms of how much they owed. Going forward, where that debt sits may become equally important. As the 2026 Federal Budget changes alter the treatment of negative gearing and capital gains tax for many future investment purchases, some investors may place greater emphasis on debt structure, cash flow efficiency and after-tax outcomes when making long-term investment decisions.
This is where offset accounts deserve renewed attention.
Most people think of an offset account as a simple interest-saving tool. However, once a loan becomes substantially or fully offset, its strategic value may extend well beyond reducing interest. In an environment where the value of future negative gearing benefits may change for some investors, the ability to retain flexibility around how debt is structured across the household balance sheet may become increasingly important.
How Debt Structure Can Influence Future Flexibility
Consider a mining and resources executive who owns an investment property with an $800,000 loan and has accumulated $800,000 in a linked offset account. From a cash-flow perspective, the loan is effectively neutralised because the offset account reduces interest to nil on the loan balance. Despite this, the investor still retains both the cash and the underlying loan structure.
A number of years later, the investor decides to purchase a new family home or a lifestyle property.
At that point, a strategic consideration emerges: Should the cash held in the investment property offset be used to extinguish investment loan, or should those funds instead be directed towards the purchase of the new private residence?
For some investors, retaining the debt against the income-producing asset while using available cash to reduce non-deductible debt on the new home (or lifestyle property) may be worth considering as part of a broader wealth planning strategy.
While interest may once again arise on the investment property loan when funds are removed from the offset account, that debt remains associated with an income-producing asset. This compares to interest expenses on the family home generally not being deductible, subject to the relevant tax rules and individual circumstances. The tax treatment will ultimately depend on the purpose of the borrowing, how the strategy is implemented and the investor’s individual circumstances.
For some households, these circumstances may prompt a review of how available capital and debt are structured across the balance sheet.
As announced in the 2026 Federal Budget, properties purchased prior to 7:30pm on 12 May 2026 remain subject to the transitional arrangements that preserve access to existing negative gearing treatment. Therefore, the same consideration around where surplus cash is held may also be relevant for mining and resources executives who own pre-2026 family homes or lifestyle properties that may later become investment properties.
Why does that matter?
Traditionally, many mining and resources executives focused on reducing debt wherever possible. However, debt attached to a private residence is generally non-deductible, while interest relating to an income-producing asset may be deductible, subject to the relevant tax rules and individual circumstances. As the value of negative gearing may change for some future property investments, the question may become less about eliminating debt altogether and more about deciding which debt should be reduced first and where capital is most effectively deployed across the family balance sheet.
The offset account creates flexibility because the underlying investment loan has never been repaid. You then retain the ability to reassess how capital and debt are positioned across the family balance sheet as circumstances change.
This is not about creating debt unnecessarily. Nor is it about using borrowing simply to generate deductions.
Rather, it is about recognising that under the new rules, the structure and location of debt may become a more important consideration in overall wealth planning.
For many affluent mining and resources executives, financial decisions are rarely made in isolation. A new home purchase may coincide with the sale of vested employee shares. A mining and resources business owner may be approaching a succession event. An executive may be considering retirement, a sea change or the acquisition of a lifestyle property. Adult children may require financial assistance entering the property market.
In each of these situations, capital is being redeployed and balance sheets are being reshaped. The question is often not whether sufficient wealth exists, but how that wealth should be structured.
That is why the conversation around offset accounts can be so important. A fully offset loan preserves optionality. It allows you the ability to reassess opportunities as they emerge rather than locking capital into a decision that may later be difficult or expensive to reverse.
Of course, strategies involving debt should never be viewed through a tax lens alone.
Retaining debt may affect cash flow, borrowing capacity and overall risk. A loan that remains in place is still a liability, even if it is fully offset. Future lending decisions will continue to be assessed by lenders based on income, liabilities, serviceability and broader financial circumstances.
Broader Considerations
Many high-income households are simultaneously managing investment portfolios, employee share schemes, trusts, business interests and superannuation strategies. In each case, a similar question may arise: should available capital be used to reduce non-deductible debt, or should it remain available while debt is retained against income-producing assets?
The answer will differ from one family to the next, and the most appropriate approach will depend on cash flow requirements, investment objectives, risk tolerance and future plans.
What is increasingly clear, however, is that the conversation is becoming less about debt elimination and more about debt allocation.
The recent changes to negative gearing and capital gains tax do not make offset accounts more tax-effective in their own right. What they may do, however, is increase the importance of debt structure. As investment decisions become more focused on cash flow, after-tax outcomes and the efficient deployment of capital, the location of debt may become just as important as the amount of debt itself.
The more important question may increasingly be whether that debt is sitting in the right place.
If you would like to explore how these considerations apply to your own circumstances, contact James Marshall, Brett Cribb or the Resources Unearthed team on +61 (0) 7 3007 2000 or email contact@resourcesunearthed.com.au.
To learn more about James, visit this link.
Resources Unearthed is a solutions hub that connects senior executives, established professionals, and business owners in mining and resources with proven specialist advisers.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth ABN 54 139 889 535 AFSL 357306. This advice is general and does not take into account your objectives, financial situation, or needs. You should not act on it without first obtaining professional financial advice specific to your circumstances.
*Please note: For financial advice and services relating to this matter that are not offered under the Fortnum Private Wealth AFSL, in accordance with our collaborative advice model, when required, such matters are referred to appropriately qualified professionals.
