Debt Recycling Calculator
See how turning your home loan into tax-deductible investment debt could compare with simply paying it off.
Debt recycling uses borrowed money to invest. If investments fall, you still owe the debt. Get advice from a licensed financial adviser and a tax agent before you start.
Printed from ClearCalc (clearcalc.com.au/debt-recycling-calculator/). Estimates only, not financial advice.
What is debt recycling?
Interest on your home loan isn't tax-deductible, but interest on money borrowed to invest usually is. Debt recycling gradually swaps one for the other:
- Pay down your home loan with savings or spare cash.
- Borrow the same amount back through a separate loan split and use it only to buy income-producing investments, such as shares or ETFs.
- Claim the interest on the investment split as a tax deduction.
- Use the tax refund and investment income to pay down more of the home loan, and repeat.
Your total debt stays about the same, but more of it becomes deductible over time, and you build an investment portfolio alongside your home.
How the calculator compares the two paths
Paying off the loan: your savings and spare cash go into the home loan, which shrinks faster. Debt recycling: the same cash goes into the home loan, but every extra dollar is re-borrowed and invested, and refunds and dividends are used to pay the home loan down further. The comparison shows your net position, investments minus all debt, after allowing for capital gains tax if you sold.
The risks
- Investments can fall in value while the debt stays the same.
- If rates rise, the cost of the investment debt rises too.
- Mixing loan purposes, or using the investment split for anything else, can make the interest non-deductible.
- From 1 July 2027, announced changes to the CGT discount may reduce the after-tax return on new growth.
This calculator is a simplified model for general information. It isn't financial or tax advice.
Frequently asked questions
Is debt recycling legal?
Yes. It's a recognised strategy, as long as the borrowed money is used to produce assessable income and the loans are kept separate.
Do I need a split loan?
Yes. The investment borrowing needs its own loan split so the deductible interest can be clearly traced. Don't mix it with your home loan or redraw it for personal spending.
Who does debt recycling suit?
Usually people with a stable income, a home loan, spare cash flow each month, a long time frame and a tolerance for investment risk.
Last reviewed October 2026. This calculator gives an estimate for general information only. Check important figures with the relevant government agency or a licensed professional.