Pay down or recycle
Debt recycling calculator.
Debt recycling means paying down your home loan, then borrowing the same amount back through a separate loan to invest, so the home debt shrinks while the investment debt grows. This tool compares that with simply paying off the home loan, on your assumptions, starting from an editable example.
Difference at the end
+$40,470
The recycling net position less the paying-off net position; it can be negative.
Home loan cleared
Not within the period
The financial year the home loan reaches zero; the card shows the recycling path, and the table shows both.
Investment loan interest
$141,783
Total interest on the investment loan over the period, which may be deductible depending on how the money is used.
Investments
$364,431
The value of the investments; the card shows the recycling path, and the table shows both.
Tax value if the interest is deductible
$45,370
How much the investment loan interest may reduce your tax over the period, on the tool's assumption that it is deductible. Whether it is deductible for you depends on how the borrowed money is used.
In today's dollars
+$24,698
The figure above in today's dollars, discounted for inflation at the rate you set, so you can compare it with money now.
This calculator is not intended to be relied on to make a decision about a financial product. Consider getting advice from a licensed financial adviser before you make any financial decision.
On these assumptions, after 20 years the recycling net position is +$40,470 compared with paying off, where a minus sign means recycling finishes lower, and the home loan reaches zero in on the recycling path.
At the end, side by side
| Recycling | Paying off | |
|---|---|---|
| Home loan | $437,948 | $407,039 |
| Investment loan | $293,052 | $0 |
| Investments | $364,431 | $0 |
| Net position | -$366,569 | -$407,039 |
| In today's dollars | -$223,707 | -$248,404 |
| Home loan cleared |
Year by year
| Year | Net position: Recycling | Net position: Paying off | Home loan | Investment loan | Investments |
|---|---|---|---|---|---|
| 2026-27 | -$722,418 | -$722,418 | $722,418 | $8,582 | $8,582 |
| 2027-28 | -$713,186 | -$713,300 | $713,418 | $17,582 | $17,814 |
| 2028-29 | -$703,260 | -$703,614 | $703,972 | $27,028 | $27,740 |
| 2029-30 | -$692,591 | -$693,323 | $694,053 | $36,947 | $38,409 |
| 2030-31 | -$681,129 | -$682,390 | $683,628 | $47,372 | $49,871 |
| 2031-32 | -$668,820 | -$670,775 | $672,666 | $58,334 | $62,180 |
| 2032-33 | -$655,606 | -$658,435 | $661,130 | $69,870 | $75,394 |
| 2033-34 | -$641,425 | -$645,325 | $648,985 | $82,015 | $89,575 |
| 2034-35 | -$626,210 | -$631,397 | $636,188 | $94,812 | $104,790 |
| 2035-36 | -$609,891 | -$616,599 | $622,699 | $108,301 | $121,109 |
| 2036-37 | -$592,393 | -$600,879 | $608,471 | $122,529 | $138,607 |
| 2037-38 | -$573,635 | -$584,177 | $593,455 | $137,545 | $157,365 |
| 2038-39 | -$553,532 | -$566,433 | $577,600 | $153,400 | $177,468 |
| 2039-40 | -$531,990 | -$547,582 | $560,851 | $170,149 | $199,010 |
| 2040-41 | -$508,913 | -$527,555 | $543,147 | $187,853 | $222,087 |
| 2041-42 | -$484,196 | -$506,278 | $524,426 | $206,574 | $246,804 |
| 2042-43 | -$457,726 | -$483,674 | $504,620 | $226,380 | $273,274 |
| 2043-44 | -$429,385 | -$459,658 | $483,657 | $247,343 | $301,615 |
| 2044-45 | -$399,045 | -$434,145 | $461,460 | $269,540 | $331,955 |
| 2045-46 | -$366,569 | -$407,039 | $437,948 | $293,052 | $364,431 |
Growth and income here are your assumptions, not a forecast, and investments can fall in value. Past performance is not a guarantee of future results. Individual results vary.
Sources · 2026-27
- ABS: Lending Indicators, June quarter 2026 (released 14 August 2026)
- RBA: Statistical table F6, housing lending rates (August 2026, published 8 October 2026)
- ASX: Historical equity data, S&P/ASX 200 month-end close of 5,154.1, September 2006 (ASX page as archived on 9 January 2007; confirmed by S&P Dow Jones Indices' daily close of 5,154.08 on 29 September 2006, S&P page as archived on 26 October 2016)
- ASX: Historical market statistics, S&P/ASX 200 month-end close, September 2026
- S&P Dow Jones Indices: S&P/ASX 200, annualised 10-year total return to 30 September 2016 (S&P page as archived on 26 October 2016; confirmed by the Reserve Bank's table F7, whose September 2006 accumulation level of 31,288.2 it implies)
- S&P Dow Jones Indices: S&P/ASX 200, annualised 10-year total return to 30 September 2026
- RBA: Statistical table F7, share market, S&P/ASX 200 accumulation index, September 2006 (RBA file as archived on 29 August 2007; the table has since been replaced)
- ATO: Taxation Statistics 2023-24, individuals, Table 3 (published 17 June 2026)
- ATO: Tax rates, Australian resident (2026-27 table)
- ATO: Personal income tax, new tax cuts (16% to 15% on 1 July 2026, then 14% on 1 July 2027)
- Treasury Laws Amendment (More Cost of Living Relief) Act 2025, Schedule 1 (rates for 2026-27 and 2027-28)
- ATO: Medicare levy reduction for low-income earners
Rates last checked 25 October 2026.
How it is worked out
- Gives both paths the same yearly budget: this year's home loan interest plus the principal you pay off.
- Paying off: your savings go against the home loan, and each year's budget pays it down. Once the loan is cleared, the budget is invested. Investment income is taxed and reinvested.
- Recycling: your savings pay down the home loan, then the same amount is borrowed back through a loan split to invest. A loan split is a separate account within your loan, so investment borrowing stays apart from home borrowing.
- Each year, the budget plus after-tax investment income pays the interest on both loans. What is left reduces the home loan, and the same amount is borrowed back through the split and invested.
- Treats interest on the investment split as deductible against the investment income, and any excess against your other income. Whether that holds for you depends on how the money is used, so ask your accountant.
- If the budget and income fall short of the interest in a year, adds the gap to the investment loan. That is a simplification, not how the arrangement should run: in practice you would fund the gap yourself. Adding unpaid interest to an investment loan while paying down a home loan has been treated as tax avoidance and the deductions denied, so in any year this happens the tool's tax figures may be overstated.
- Works out tax as tax with the investment result, less tax without it, at 2026-27 resident rates plus the Medicare levy, with later years held at the latest published rates.
- Compares the net position on each path, every year: investments, less the home loan, less the investment loan.
Why these starting figures
The tool opens on example figures so you can see how it works. Rates and thresholds set by law are the published figures on the date shown. Every other starting figure comes with the reason it was chosen, and you can change any of them.
- Home loan
- Why this starting figure: the average new owner-occupier loan in Australia, June quarter 2026.
- Interest rate
- Why this starting figure: the Reserve Bank's average rate on outstanding owner-occupier variable loans, as at August 2026.
- This starting figure is a current figure, as at the date shown, not a long-term average or a forecast, and it can change over the period.
- Principal paid off a year
- Why this starting figure: the principal repaid in the first year of a standard 30-year principal and interest loan at that size and rate, with no extra repayments.
- Savings to start with
- Why this starting figure: starts at zero, because no published figure describes it: enter your own.
- Growth a year
- Why this starting figure: the S&P/ASX 200's annualised price growth, before inflation, over the 20 years to 30 September 2026, from the month-end closing levels the ASX publishes.
- This starting figure is a long-term past average, not a forecast. A long period evens out strong and weak years, so it is a fairer starting point than recent years alone, but the future may be higher or lower.
- Income a year
- Why this starting figure: the S&P/ASX 200's average income return over the same 20 years, before franking credits: its total return, from two published 10-year returns joined at 30 September 2016, less its price growth. No official 20-year average dividend yield is currently published.
- This starting figure is a long-term past average, not a forecast. A long period evens out strong and weak years, so it is a fairer starting point than recent years alone, but the future may be higher or lower.
- Your taxable income
- Why this starting figure: the median taxable income of Australian individuals, 2023-24.
- Inflation a year
- Why this starting figure: the midpoint of the Reserve Bank's inflation target band of 2 to 3%, the default rate ASIC's calculator instrument and RG 167.106 also set.
What this tool leaves out
- Capital gains tax if the investments were sold. Net positions are before any sale.
- Fees and the cost of running a loan split, which would lower the result, and franking credits on Australian share dividends, which could raise the after-tax income. The tool includes none of them.
- Risk. Investments can fall in value, and the loan stays the same if they do.
- Changes to the interest rate. The rate you enter is held for every year.
- Mixed-purpose borrowing. If one loan funds both private and investment spending, the deductible share may be hard to work out; the tool assumes the split is kept separate.
- Whether the arrangement suits your lender, your structure or your tax position.
Questions investors ask
What is debt recycling?
It is paying down your home loan, then borrowing the same amount back through a separate loan split to invest. Over time the home debt shrinks and the investment debt grows. Whether the investment interest is deductible depends on how the borrowed money is used.
Is the interest tax deductible?
It depends on how the borrowed money is used. The tool assumes the split is used only to buy income-producing investments and treats its interest as deductible on that basis. Whether it is deductible for you is a question for your accountant, who can look at how your loans are set up and used.
Why can the result be negative?
Recycling adds investment debt and investment risk. If the investments grow or earn less than the interest costs after tax, the recycling path can end behind paying off. Try a lower growth rate to see where that happens.
Why can the home loan clear sooner or later with recycling?
Recycling adds after-tax investment income to what goes against the home loan, but it also pays interest on the investment split. Which effect is bigger depends on your rates, so the cleared year can move either way.
What counts as an investment here?
The tool treats the investments as one pool with one growth rate and one income rate. It does not model a particular asset, and it is not a recommendation to buy any.
Does this include the negative gearing rule from 1 July 2027?
No, because the tool does not model a particular property. From 1 July 2027, a net rental loss on an established home acquired at or after 7:30pm AEST on 12 May 2026, which for a purchase means contracted, can no longer reduce tax on your salary or other income, unless an exception applies; it can be used only against residential property income and gains, and the rest carries forward to be used the same way in later years. If your investment is that kind of property, a loss may be treated differently from what the tool shows.
Who should I talk to?
Your accountant on the tax treatment, a mortgage broker on the loan structure, and a licensed financial planner on the investments. We work alongside those professionals on the property side; we do not advise on tax, credit or financial products.
Where to next
If an investment property is part of your plan, we can work through it with you, your broker and your accountant.
This calculator gives general information only. Growth, income and interest rates are assumptions, not forecasts, and whether interest is deductible depends on how the borrowed money is used and on your circumstances, which only your accountant can confirm. It is not tax, credit or financial product advice, and apart from the figures you enter, it does not take into account your objectives, financial situation or needs. Borrowing to invest increases risk as well as potential return. Past performance is not a guarantee of future results. Individual results vary. CHAD Property coordinates with accountants, brokers and planners and does not give tax, credit or financial product advice, so speak with your accountant, a mortgage broker and a licensed financial planner before you act.
The tools on this page give general information only. Each result is an estimate, worked out from the figures you enter and the assumptions shown, using rates and rules as at the date shown. It is not a quote, and it is not intended to be relied on to make a decision about a financial product, a loan or your tax. It is not personal financial, tax, credit or legal advice, and apart from the figures you enter, it does not take into account your objectives, financial situation or needs. Rates, thresholds and laws change, and some details of recent changes are not yet final. CHAD Property is a buyer's agency. It does not hold an Australian financial services licence or an Australian credit licence, and it is not a registered tax agent. We do not advise on tax, lending, financial products or how to structure ownership, including through a self-managed super fund, a company or a trust; we work alongside the brokers, accountants and financial planners who do. Before you make a financial decision, consider getting advice from a licensed financial adviser, and check any figure here with a licensed or registered professional who knows your situation.