7 powerful ways to use debt to build wealth

Most people I meet in tech treat debt like the enemy. Pay off the mortgage. Then invest. Then retire.

It feels safe. But it’s slow, and it’s expensive.

Wealthy families do it differently. They use debt as a tool. They borrow to buy assets that grow, and they make the interest tax deductible.

I’ve built more than 300 retirement plans over 18 years. In most of the plans that reach $15K to $25K a month in retirement, good debt does a lot of the heavy lifting.

Here are the 7 ways I use it with clients. This is general information only. Your situation will be different, so get advice before you borrow.

Updated October 2026. You can still borrow to invest in ETFs, and the interest is still 100% tax deductible. What the 2026 Budget changed is property. From 1 July 2027, losses on established investment property bought after 12 May 2026 can no longer reduce the tax on your salary. Shares and ETFs keep the existing rules. Ways 4 and 5 below are updated, and there is a new section on what the Budget changed.

Good debt vs bad debt

Good debt buys an asset that can grow and earn income. The interest on it is generally tax deductible.

• An investment loan for shares or ETFs
• A loan for an investment property
• An investment split on your home loan

Bad debt buys something that won’t earn income. The interest is not deductible.

• Your home loan
• Car loans
• Credit cards you don’t clear each month

On a $400K salary you’re on the 47% tax rate. So every dollar of bad debt interest costs you almost two dollars of income before tax. That’s why the order matters.

How the rich use debt to get richer

The idea is simple. Borrow at around 6% to 7%. Invest in assets that have historically returned more than that over the long term. Claim the interest as a tax deduction.

On the top tax rate, almost half your interest generally comes back at tax time. So the real cost of the loan drops a lot.

Then time does the rest.

7 ways to use debt to build wealth

1. Clear expensive debt first

Credit cards at 20% and car loans at 9% are wealth killers. Pay them off, or roll them into your home loan at a lower rate.

The goal is one home loan and nothing else. Then you’re ready to start building good debt.

2. Run every dollar through an offset account

Pay your salary straight into an offset account linked to your home loan. Every dollar sitting there saves interest at your home loan rate.

On a 6% loan, $100K in offset saves about $6,000 a year. And there’s no tax on it, because you’re saving interest, not earning it.

Spend on a credit card you clear in full each month. Your cash stays in the offset for longer.

3. Point every bonus and RSU vest at the home loan

Commission and RSUs come in lumps. Most people let them disappear into lifestyle.

I give clients a set plan for every lump: tax first, then the home loan, then super and investments. Vested RSUs get sold on a schedule, not on gut feel, and the cash goes into the offset.

That one habit can take years off a mortgage. It also cuts how much of your wealth sits in one company’s stock.

4. Turn your home loan into tax deductible debt

This is debt recycling, and it’s the main strategy I use.

You pay money off your home loan. Then you redraw the same amount through a separate investment split and invest it. Your total debt stays the same. But that part of it is now generally tax deductible.

Repeat it with every bonus, vest and surplus. Over time the bad debt shrinks and the good debt grows.

One Head of Sales I work with turned $700K of home loan into tax deductible debt. His taxable income dropped by $117K, and he got $55K back. Read his case study.

This was not affected by the 2026 Budget. For most of my clients, it now means recycling into shares or ETFs rather than established property. The interest is still 100% tax deductible against your salary, and the portfolio is easy to diversify and add to every month.

5. Borrow against your home equity to invest

If your home has a lot of equity, it may be sitting idle. You can set up a separate investment loan against it and invest in a diversified portfolio.

Here’s an illustrative example. It’s not a forecast.

• Borrow $1M at 6.5%, interest only. The interest is $65K a year.
• On the 47% tax rate, around $30K comes back as a tax refund.
• So the net cost is about $35K a year to control a $1M portfolio.
• Assume a 10% average return over the long term. By the rule of 72, money doubles roughly every 7 years.
• $1M could grow to $2M in 7 years, and $4M in 14 years. Less the original $1M loan, that’s about $3M.

Markets don’t go up in a straight line. Some years will be negative. That’s why this only works with a long time frame and a cash buffer.

One tech VP I work with had a $5M home with no debt and $3.8M in company shares. A $1M investment loan was part of his plan. He’s now on track for $25K a month in retirement. Read his case study.

Since the 2026 Budget, which asset you borrow for matters more than ever. Borrow for an established investment property bought after 12 May 2026, and from 1 July 2027 any loss can only be used against property income. Borrow for shares or ETFs, and the interest is still 100% tax deductible. New builds are the exception on the property side.

Growth after 1 July 2027 will also be taxed under the new CGT rules, with indexation instead of the 50% discount. Factor that into any long term projection, including the one above.

6. Keep your loans split and clean

The tax office looks at what the money was used for, not what it’s secured against.

So never mix private and investment spending in one loan. Use separate splits, and keep investment money in its own account. One mixed redraw can make the interest hard to claim.

I set this up with your broker and accountant from day one.

7. Prepay interest before 30 June

If you have an investment loan, you may be able to prepay up to 12 months of interest before 30 June and claim it in that tax year.

In a year with a big bonus or vest, that can pull a large deduction into the year you need it most.

One client told me, “I used to hate June. Now I look forward to it.”

What the 2026 Budget changed

The 2026 Budget did not change this. You can still borrow to invest in ETFs, and the interest is still 100% tax deductible against your salary.

Negative gearing on established property is ending. Negative gearing on shares and ETFs is not.

From 1 July 2027, losses on established residential property bought after 7:30pm on 12 May 2026 can only be used against residential property income. They can no longer reduce the tax on your salary. Any excess is carried forward.

Property you already owned on Budget night keeps the old rules until you sell. New builds can still be negatively geared. Shares, ETFs and commercial property stay under the existing rules.

The same law replaces the 50% CGT discount from 1 July 2027 with indexation for inflation and a 30% minimum tax on real gains. That one applies to shares too. Gains made before 1 July 2027 keep the 50% discount.

For a high earner using debt to build wealth, the takeaway is simple. You can still borrow to invest in shares and ETFs, and the interest is still 100% tax deductible, as long as the loan is used only for the investments. Borrowing for an established investment property now works very differently. More detail on my debt recycling page.

The risks you need to know

• Markets can fall, and you still owe the full loan.
• Interest rates can rise, which lifts your costs.
• Commission and RSUs can change, or stop if you change jobs.
• Borrowing magnifies gains and losses.
• Tax rules can change.

This suits people with a stable, high income, real equity, a cash buffer and at least 10 years to invest. It doesn’t suit everyone.

Who I do this for

My clients are tech executives and sales leaders, aged 40+, earning $400K+ with RSUs or big commissions. Most have at least $500K in super and $1M of equity in their home, and can save at least $4,000 a month above their minimum mortgage repayments.

If that’s you, debt is probably the biggest lever you’re not using yet.