A 100% offset account is a transactional banking account which is linked to your loan account. When banks charge interest on your loan, they firstly deduct the balance in your offset account from your loan balance and calculate the interest based on the net balance at the current interest rate.
For example, you use offset as saving account, accumulating your savings as well using it for daily transactions. if your current loan balance is $400,000, while you have balance of $40,000 in credit in offset account. Bank will charge you interest over $360,000, not $400,000. You pay 10% less interest. Because offset account is transactional, you can use it like any bank account, for ATM, EFTPOS and Bpay etc, while its balance reduceds your interest cost.
Offset account doesn't earn interest for you (so you don't pay tax). It reduces your home loan interest at the same interest rate.