Debt recycling strategy: a worked example for a Sydney tech couple

Debt recycling is one of the strategies I use most with tech executives. It’s also one of the most misunderstood.

So here’s a worked example, step by step. It’s illustrative. It’s not a client and not a forecast. But it’s built on the kind of position I see every week.

The starting point

Meet Sam and Alex. Both in their mid 40s. Sam is a sales director at a US listed tech company. Alex works in product, four days a week.

• A Sydney home worth $2.4M, with a $900K mortgage at 6%.
• $200K sitting in the offset account.
• RSUs vesting at about $160K a year before tax.
• About $40K a year of spare cash after spending.

On paper they’re doing well. But none of their mortgage interest is deductible, and almost all their wealth is in the house and one company’s shares.

Step 1: split the loan

First, the home loan is split in two. One split for the home. One split for investing.

The two must never be mixed. Keeping them separate is what generally makes the interest on the investment split tax deductible.

Step 2: recycle the offset cash

The $200K in the offset pays the home split down to $700K. They then borrow $200K back on the investment split and invest it in a diversified portfolio of ETFs.

The total debt is the same $900K. But now $200K of it is investment debt.

At 6%, that’s $12K a year of deductible interest. At Sam’s 47% tax rate, about $5,600 of it comes back at tax time.

The trade off is real. That $200K is no longer saving interest in the offset. It’s invested in the market instead, and the cost of borrowing it is deductible.

Step 3: repeat every year

Each year, Sam sells 50 to 70% of his RSUs at vest and sets the tax aside. What’s left over, plus the couple’s spare cash, comes to about $80K. It goes onto the home split. Then they borrow the same $80K back on the investment split and invest it.

Year	Home loan	Investment loan	Deductible interest
Start	$700K	$200K	$12K a year
Year 3	$460K	$440K	$26K a year
Year 6	$220K	$680K	$41K a year
Year 9	Nil	$900K	$54K a year

After about 9 years, the whole $900K is investment debt. Put the tax refunds back in too, and it’s faster again.

If the portfolio grew at 7% a year, it would be worth about $1.3M by then. That’s illustrative, not a forecast. Markets don’t go up in a straight line.

What the Budget changed, and what it didn’t

The 2026 Budget limits negative gearing on established residential property bought after Budget night, from 1 July 2027. Shares and ETFs keep the current rules. Interest on money borrowed to invest in them is still generally deductible.

The CGT change does apply to shares. From 1 July 2027, the 50% discount is replaced by indexation and a 30% minimum tax on real gains. Debt recycling still works. It just means planning how and when you’ll draw on the portfolio in retirement.

The risks

• Markets fall. Borrowing to invest magnifies losses as well as gains. Only invest money you won’t need for 7 to 10 years.
• Rates rise. Higher rates mean higher costs, even when the interest is deductible.
• Mixing the loans. Using the investment split for anything personal can taint the deduction. Keep it clean.
• Income stops. Tech jobs aren’t always secure. Keep a cash buffer and the right insurance.

Is it right for you?

Debt recycling generally suits people with a strong income, real equity in their home, spare cash each year and a long time frame. That describes a lot of tech executives.

It isn’t for everyone, and the setup matters. A badly structured loan is the most common mistake I fix.

The free Debt Recycling Playbook walks through each step. You can also see how I set it up on my debt recycling page, or read 7 powerful ways to use debt to build wealth.