What is debt recycling?
Debt recycling is a financial strategy sometimes
used by Australians to gradually convert non-deductible home loan debt into potentially tax-deductible investment debt.
It works by:
- Paying down your home loan with surplus income.
- Redrawing or reborrowing that amount from your mortgage.
- Investing those funds into income-producing assets (e.g., shares, investment property, managed funds).
Over time, this can help reduce your home loan while building an investment portfolio.
What debt recycling is not
It’s common to confuse debt recycling with other strategies. Here’s how it differs:
❌ Not debt consolidation – it doesn’t combine multiple debts into one.
❌ Not simply debt reduction – while it can accelerate mortgage payoff, it involves creating new investment debt.
❌ Not just negative gearing – although borrowed funds may be tax deductible, the aim is to shift debt types, not just borrow to invest.
