Debt Recycling Calculator
Model how converting your non-deductible mortgage into tax-deductible investment debt can build wealth faster. Adjust your mortgage balance, investment assumptions and salary to see year-by-year portfolio growth, tax refunds and dividends — all in one view.
How Debt Recycling Works
Make extra repayments
Pay extra into your mortgage to build up redraw
Redraw to invest
Redraw that equity and invest in income-producing shares or ETFs
Claim the deduction
The interest on invested debt becomes tax-deductible at your marginal rate
Reinvest the returns
Use tax refunds + dividends to pay down non-deductible debt faster
Debt Recycling — Common Questions
What is debt recycling?
Debt recycling converts your non-deductible home loan into tax-deductible investment debt. You redraw equity from your mortgage to invest in income-producing assets (typically shares or ETFs). The ATO allows you to claim the interest on money borrowed for investment as a tax deduction — the refund and dividend income then go back to paying off the non-deductible portion faster.
Is debt recycling legal in Australia?
Yes. The strategy is fully legal under Australian tax law provided borrowed funds are used for income-producing investments. The ATO allows interest deductions under section 8-1 of ITAA 1997. Clear record-keeping is essential — you must be able to demonstrate the direct link between borrowed funds and the investment purchase.
Who is debt recycling best suited for?
Debt recycling works best for homeowners with a variable-rate mortgage (with redraw or offset), a marginal tax rate of 32.5% or above, stable income, a long investment horizon (10+ years), and a reasonable risk tolerance. It is not appropriate for those with interest-only loans without redraw, low income, short time horizons, or low tolerance for investment volatility.
What are the risks?
Key risks include: investment losses while mortgage debt remains; rising interest rates increasing costs; potential ATO rule changes; and amplified downside if both the market falls and rates rise simultaneously. Because you are investing borrowed money, you are taking on leveraged risk. A licensed financial adviser should review your specific situation before you implement this strategy.
Does this calculator include franking credits?
Yes. The franking level slider lets you set the percentage of dividends that are franked at the 30% corporate tax rate (broad ASX ETFs typically 70–80%). The calculator grosses up your dividend income by the franking credit, calculates tax at your marginal rate on the grossed-up amount, and shows you the net after-tax dividend cash — including any refund if your marginal rate is below 30%. If you have retired and your salary is $0, franking credits can generate meaningful cash refunds.
What is the salary cessation / retirement scenario?
The "Salary Stops After Year" slider lets you model what happens when your earned income drops to zero — for example at retirement or a career break. From that year onward, your marginal tax rate is calculated only on your grossed-up dividend income, which is typically much lower. This can significantly reduce tax on dividends and, if your income falls below $18,200, franking credits may become fully refundable — a powerful outcome for retirees implementing debt recycling earlier in life.
Want to Implement Debt Recycling?
Not all mortgages are set up for debt recycling. Our brokers can review your current loan structure, identify whether your mortgage supports a redraw facility, and connect you with a financial adviser for the investment side.