Turning a non-deductible debt into a deductible one

Debt recycling explained plainly, what has to be true before it works, and the conditions that stop it being worth doing.

Talk it through

Debt recycling in Australia: how it actually works is set by each lender's own credit policy, and the policies differ more than the marketing does. Money Brain has not yet published a lender-by-lender position on this, so this page explains the mechanism and names nothing it cannot source. What is here was read at source and dated.

What is debt recycling, and does it apply to me?

Debt recycling in Australia: how it actually works is set by each lender's own credit policy, and the policies differ more than the marketing does. Money Brain has not yet published a lender-by-lender position on this, so this page explains the mechanism and names nothing it cannot source. What is here was read at source and dated.

How current is this page?

Every figure on this page carries the source it came from and the date it was read. Where a lender-by-lender position has not been read at source, the page says so rather than repeating something from memory. Lender policy changes quietly and often.

What actually happens

1

Your position checked against policy

2

Borrowing power on real numbers

3

A lender chosen for the structure

4

Pre-approval, then the search

5

See the recommendation, then decide

6

Valuation, then formal approval

7

Documents signed, then settlement

What does the loan have to look like?

A loan that can be split, with a redraw or an offset that keeps the borrowed portion separate and traceable. Mixing borrowed money with savings in one account is what breaks the deductibility, and it is the commonest way the strategy fails in practice. The lender's product decides whether the structure is available at all.

What has to be true of you?

Surplus income that is genuinely spare, a non-deductible debt worth recycling against, and a tolerance for holding an investment through a fall. This is a tax and investment question as much as a lending one, so it is one to work through with your accountant as well as your broker. Money Brain arranges the credit; it does not give tax advice.

Questions

Offset against redraw for this purpose depends on the lender's own policy and on your numbers. Money Brain does not publish a lender position it has not read at source, so the honest answer here is the mechanism rather than a name — and the call gives you the name.

See where you stand before you decide anything

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Updated 13 September 2026