What is Debt Recycling in Australia?
Debt recycling is an advanced financial strategy designed to convert non-deductible debt (like a residential home loan mortgage) into tax-deductible debt (like an investment loan).
This allows home buyers to write off mortgage interest expenses against their wage income, creating significant tax refunds.
How It Works in 4 Steps
- Pay Down Mortgage: Make a lump sum payment into your home loan using cash savings.
- Split the Loan: Create an investment loan split equal to the paid-down amount.
- Redraw to Invest: Redraw the split loan balance directly to buy income-producing assets (like shares, ETFs, or investment properties).
- Claim Tax Deductions: Claim the interest costs on the split loan as tax deductions during tax returns.
Action Plan: Simulate the Benefits
- Review Loan Accounts: Confirm if your home loan has redraw capabilities or offset options.
- Model Wealth Gains: Use our Debt Recycling Strategy Simulator to see how much tax refund you can save and check the 10-year investment projections.
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