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Debt Recycling Calculator Australia (2025–26 Tax Rates) — Free Tool

Debt recycling converts your non-deductible home loan into tax-deductible investment debt — without borrowing more in total. This free debt recycling calculator uses 2025–26 Australian tax rates (including the Stage 3 cuts), the Medicare Levy, franking credits, dividend yield and capital growth to model how fast you’d pay off your home loan, how much investment wealth you’d build and your after-tax return — before you commit to the strategy.

Debt Recycling Calculator

Debt Recycling Calculator

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Is debt recycling right for me? — 5-question self-check

Debt recycling isn’t right for everyone. Before you run the numbers, work through the five questions below. If you answer “yes” to all five, debt recycling is likely worth modelling. If you answer “no” to even one, talk to an AFSL-licensed financial adviser before going further — the strategy can do more harm than good in the wrong circumstances.

The five questions:

  1. Do you have at least 20% equity in your home? (Lenders generally need this to release funds for an investment split — and you want to keep your overall loan-to-value ratio sensible.)
  2. Is your combined household taxable income at or above $120,000? (Debt recycling works hardest when your marginal tax rate is 30% or higher under the 2025–26 brackets, because the tax deduction on the investment loan interest is worth more.)
  3. Are you comfortable holding the investments for at least 5–10 years? (Debt recycling is a long-game strategy. Shares and ETFs are volatile in the short term — you need a horizon long enough to ride out a downturn.)
  4. Are you comfortable with the value of your investments falling — possibly by 30% or more — in a bad year? (You’ll still owe the investment loan even if the portfolio is down. If that thought keeps you up at night, this strategy isn’t for you.)
  5. Do you have an accountant or financial adviser you can work with? (Debt recycling has tax, lending and investment moving parts. You need professional eyes on the structure before you commit.)

The results generated by this calculator are provided for general information purposes only and are based on the information you input. They are indicative estimates only and do not constitute an offer of finance, credit approval, or a formal quote. This calculator does not take into account your personal or business objectives, financial situation, or needs and should not be relied upon as financial, legal, or tax advice. Actual terms, rates, fees, repayments, and eligibility criteria may vary depending on lender assessment and individual circumstances. You should not make any financial decision based solely on these results and we strongly recommend speaking with one of our finance specialists to obtain advice tailored to your specific situation before proceeding.

Is debt recycling right for me? — 5-question self-check

The five questions:

  1. Do you have at least 20% equity in your home? (Lenders generally need this to release funds for an investment split — and you want to keep your overall loan-to-value ratio sensible.)
  2. Is your combined household taxable income at or above $120,000? (Debt recycling works hardest when your marginal tax rate is 30% or higher under the 2025–26 brackets, because the tax deduction on the investment loan interest is worth more.)
  3. Are you comfortable holding the investments for at least 5–10 years? (Debt recycling is a long-game strategy. Shares and ETFs are volatile in the short term — you need a horizon long enough to ride out a downturn.)
  4. Are you comfortable with the value of your investments falling — possibly by 30% or more — in a bad year? (You’ll still owe the investment loan even if the portfolio is down. If that thought keeps you up at night, this strategy isn’t for you.)
  5. Do you have an accountant or financial adviser you can work with? (Debt recycling has tax, lending and investment moving parts. You need professional eyes on the structure before you commit.)
Quick Enquiry

Result key:

  • 5 of 5 “yes” = Pass. Run the calculator below to model the numbers — then book a call with us to structure the loan.
  • 3–4 of 5 “yes” = Maybe. The strategy might work for you with the right setup. Speak to a financial adviser and a mortgage broker before going further.
  • 0–2 of 5 “yes” = Not yet. The conditions for debt recycling aren’t in place yet. Focus on building equity, lifting income or extending your investment horizon first, then revisit.

What is debt recycling?

Debt recycling is an Australian wealth-building strategy that converts your non-deductible home loan debt into tax-deductible investment debt over time. You make extra repayments on your home loan, redraw the equivalent amount into a separate investment loan split, and invest the proceeds in income-producing assets like ASX dividend ETFs. Your total debt stays the same — but more of it becomes tax-deductible each year.

The results generated by this calculator are provided for general information purposes only and are based on the information you input. They are indicative estimates only and do not constitute an offer of finance, credit approval, or a formal quote. This calculator does not take into account your personal or business objectives, financial situation, or needs and should not be relied upon as financial, legal, or tax advice. Actual terms, rates, fees, repayments, and eligibility criteria may vary depending on lender assessment and individual circumstances. You should not make any financial decision based solely on these results and we strongly recommend speaking with one of our finance specialists to obtain advice tailored to your specific situation before proceeding.

Frequently Asked Questions

Yes. Debt recycling uses the ordinary deductibility rules in the tax law — interest on a loan used solely to acquire income-producing assets is deductible. The strategy itself isn’t a product; it’s a way of arranging loans you would otherwise have. Compliance comes down to keeping the loans separated and the use clean.
There’s no fixed minimum, but in practice you need (a) enough home equity to release a split — typically a loan-to-value ratio of 80% or lower — and (b) at least a few thousand dollars of spare cash flow each month to feed the cycle. Most households start with an initial investment split of $20,000–$50,000.
Plan for 5–10 years. The tax benefit shows up in the first year, but the meaningful wealth difference (a sizeable investment portfolio plus a smaller mortgage) compounds over time. Anything less than five years is too short to ride out a normal market drawdown.
Yes, in practice. The strategy involves choosing investments (financial advice), a tax position (tax advice) and a loan structure (broker advice). A mortgage broker can set up the loans. An AFSL-licensed financial adviser should sign off on the investment choice. An accountant or registered tax agent should sign off on the deduction position.
Loan statements showing the split, contract notes for every investment purchase, dividend statements, and any correspondence with the lender confirming the purpose of the investment split. Keep everything for at least five years after the loan is repaid — the ATO’s review window can extend that long for amended assessments.
* Disclaimer: Loans and the benefits associated with them are only available to those who have been approved. The information provided on this page is general and does not consider your individual circumstances. It is not meant to serve as a substitute for professional advice, and you should not rely on it for any decisions. Always consult with a professional regarding finance, tax, and accounting matters before making any choices or taking action.

About the Author

Jeff Suter

Jeff Suter is the Director of Dark Horse Financial, an Australian specialist finance brokerage helping business owners and individuals secure funding solutions when traditional lenders fall short. With extensive experience across commercial lending, home loans, and complex finance scenarios, Jeff is known for delivering tailored strategies that align with each client’s unique goals. He works closely with a broad panel of bank and non-bank lenders to structure competitive, flexible finance solutions, supporting clients through everything from growth funding to debt restructuring.

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