GST offset accounts are designed to help businesses plan to meet their tax obligations (ie. regular monthly or quarterly returns to the tax office) without it being a great drain on their cash reserves.
Businesses can set aside GST collections from sales in a dedicated account so that when the tax is due the funds don't have to be found from general cash reserves. But the real bonus comes with the linking of the account to an overdraft so that interest earned on the debit balance in the GST account can be used to offset interest charged on the overdraft.
Rather than have cash sitting in an account doing nothing and then having to draw on an overdraft to meet business needs from day to day, a GST offset account allows your tax payments to keep working for you until the day they are paid to the tax office.
Most banks have introduced GST offsets since July 1 2000 but each has different charges and conditions applying. When comparing accounts, check:
- The number of free deposits allowed before transaction fees apply, and how deposits can be made (electronically, cheque, phone etc.)
- Are withdrawals allowed, if so, at what cost?
- Any monthly account-keeping fee?
- Is a full offset offered? Is the interest earned on the account equal to the interest charged on your overdraft?
- Does the account offer direct remittance of tax to the tax office when due?
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