Learn about debt recycling and how it differs from other equity investment strategies. This calculator helps you compare various debt and investment scenarios.
Debt recycling is a strategy that converts non-tax-deductible debt (like your home loan) into tax-deductible investment debt. The goal is to restructure your debt so that more of your interest payments become tax-deductible, potentially reducing your tax burden.
Converting existing non-deductible debt (like your home loan) into tax-deductible investment debt. You sell investments, pay CGT, pay down home loan, then borrow the same amount as an investment loan.
Drawing new equity from your home to invest in income-producing assets. This increases your total debt but gets more funds into investments sooner.
Combining both approaches: sell investments to pay down home loan, then draw both the recycled equity and additional existing equity to maximise your investment amount.
Investment loan interest becomes tax-deductible, potentially reducing your tax burden.
Both strategies require careful planning and understanding of investment risks and market conditions.
High-income earners with home equity, stable employment, and a long-term investment horizon.
Understand your current position, consult professionals, and use our calculator to explore both strategies.
If you sell investments on or after 1 July 2027, you may pay CGT under the new rules. That changes the tax cash you need at sale. Include that CGT when you decide whether recycling still stacks up.
For the full breakdown of the 2026 CGT reform and worked examples, see our CGT calculator and 2027 reform guide.
Debt recycling is a strategy that converts non-tax-deductible debt (like your home loan) into tax-deductible investment debt. The process involves selling existing investments, paying capital gains tax, using the proceeds to pay down your home loan, then borrowing the same amount as an investment loan. The result is the same total debt amount, but more of it becomes tax-deductible.
The main benefit of debt recycling is that it converts non-deductible debt into tax-deductible debt, potentially reducing your tax burden. Investment loan interest becomes tax-deductible, which can improve your cash flow and overall financial position. However, it requires careful planning and understanding of investment risks.
Debt recycling is typically suitable for high-income earners with home equity, stable employment, and a long-term investment horizon. You should have existing investments to sell, be comfortable with the capital gains tax implications, and have a clear understanding of investment risks. Always consult with qualified financial advisors before implementing this strategy.
Debt recycling converts existing non-deductible debt into tax-deductible debt without increasing your total debt amount. Equity investment involves drawing new equity from your home to invest, which increases your total debt but gets more funds into investments sooner. Debt recycling requires selling investments and paying CGT, while equity investment doesn't require selling existing investments.
Debt recycling involves several risks including capital gains tax on sold investments, investment market volatility, interest rate changes, and the need to maintain sufficient income to service the investment loan. There's also the risk that investment returns may not exceed the cost of borrowing. It's essential to understand these risks and consult with professionals before proceeding.
Yes, debt recycling typically requires selling existing investments, which triggers capital gains tax (CGT) on any profits. You'll need to factor in the CGT liability when calculating whether debt recycling is beneficial for your situation. The calculator can help you model the tax implications of this strategy.
If you sell investments on or after 1 July 2027, you may pay CGT under the new rules. That changes the tax cash you need at sale. Include that CGT when you decide whether recycling still stacks up, especially if the sale might fall after 1 July 2027.
Yes, debt recycling is a legitimate and legal tax planning strategy in Australia when implemented correctly. The Australian Taxation Office (ATO) recognises that interest on loans used to purchase income-producing investments is generally tax-deductible. However, it's crucial to ensure the strategy is structured correctly and complies with ATO guidelines.
Use our free debt recycling calculator to model different scenarios. Enter your personal information, property details, investment portfolio, and scenario parameters. The calculator will show you the tax benefits, cash flow impact, and help you compare different strategies. However, always consult with qualified financial advisors for personalised advice.
Use this comprehensive calculator to model both debt recycling and equity investment scenarios. See how each approach could affect your financial situation.
Try the CalculatorThis information is for educational purposes only and should not be considered as financial guidance. Both debt recycling and equity investment strategies involve significant risks and may not be suitable for everyone. Always consult with a qualified financial advisor, accountant, or mortgage broker before implementing any strategy.