Owning shares or exchange-traded funds (ETFs) outright while carrying a home loan is a common starting point for debt recycling. The portfolio does not make your home loan interest deductible, because the shares were bought with cash and not with borrowed money. Changing that involves decisions about your loans, your tax position and your investments, and each has a different adviser.
Home › Blog › Debt Recycling With Existing Shares
Most guides assume you start with a home loan and no investments. With a portfolio already in place there are more options and more to review, which is where a debt recycling mortgage broker starts.
The security for a loan does not decide its tax treatment. The use of the money does.
List each split and what it funded. Redraws used for a car, a renovation or a holiday inside an investment split leave it mixed. Past top-ups need the same check.
Borrowing secured against an investment property that funded your home deposit is non-deductible, despite the security. Margin loans and lines of credit should be mapped by purpose in the same way.
There are two decisions here, and they can be made separately.
| Future Purchases Only | Using The Existing Portfolio | |
|---|---|---|
| What happens | New investments are funded from a new split. Existing shares stay as they are | Shares are sold, proceeds repay non-deductible debt, and a new split funds new investments |
| CGT | None triggered | Triggered on each parcel sold |
| Speed | Gradual | Converts a larger amount at once |
| Main questions | Lending and cash flow | Tax, investment strategy and lending |
How the lending works for new purchases is covered on our debt recycling with shares and ETFs page.
Whether to sell, what to sell and what to buy afterwards is financial advice. Questions for your adviser:
Each sale is a CGT event. From 1 July 2027 the 50% CGT discount is replaced by cost base indexation and a 30% minimum tax on gains accruing from that date, with gains accrued before then keeping the existing treatment. The one-off tax, plus brokerage and buy-sell spreads, should be weighed against the annual deduction it creates.
Selling a holding and promptly repurchasing the same one leaves your economic position unchanged. The Australian Taxation Office (ATO) has warned about wash sales, and the general anti-avoidance rules in Part IVA can apply where the dominant purpose of an arrangement is a tax benefit. Whether that applies to your circumstances is a question for a registered tax agent before any trade is placed.
Couples often hold a joint home loan with shares in one name or in different proportions. The ATO treats dividends as assessable to the owner of the shares, and jointly held shares are assumed to be owned equally. Who can claim interest when a joint loan funds shares in one name depends on who borrowed, who owns and who pays, and it should be settled with your accountant before the split is created.
Any new investment borrowing follows the same rules as a first-time recycle.
A new investment split adds a repayment. Dividends and distributions vary from year to year, so the repayment needs to be affordable from salary.
An investment property adds deductible debt, rental income and a second security to the review.
We cover the lending side in more detail on our debt recycling with investment property page.
A professional couple came to us owning their home, two investment properties and a $550,000 share portfolio with no debt against it. When they bought their home, their previous bank had drawn $320,000 against the two rentals to fund the deposit. That debt was non-deductible, despite sitting on investment properties.
They had researched the strategy and brought their own plan. Our work was the lending:
| Step | Amount |
|---|---|
| Shares sold | $350,000 |
| Paid off the home loan | $200,000 |
| Cleared a non-deductible split on one rental | $150,000 |
| Redrawn through the new investment split to buy shares | $325,000 |
| Further amount recycled three months later, no new application | $80,000 |
The decision to sell and what to repurchase sat with the couple and their own advisers, and the tax outcome is subject to their accountant. The full file is in our $350,000 share portfolio case study.
An existing portfolio gives you more ways to start and more to check first. Map what every current loan was used for, decide with your adviser whether existing holdings stay or change, and have your accountant cost the tax before anything is sold. The lending comes last: a separate split, a clean trail and a structure that can keep recycling as you invest.
We map what each of your loans was used for and show how a separate investment split could be arranged, ready for your accountant and adviser to review. Our free calculator gives an estimate to take to your accountant and adviser.
Book a free call →Yes, though owning them does not create a deduction. Either new purchases are funded from a new split, or shares are sold and the proceeds pass through the loan.
No. You can leave the portfolio in place and recycle only future investments.
This is a tax question. Selling and promptly repurchasing the same holdings can attract ATO attention under the anti-avoidance rules, so get advice from a registered tax agent first.
It depends on each parcel's cost base, your income and when the gain accrued. The rules change from 1 July 2027, and your accountant can calculate it by parcel.
Dividends are taxed to the owner of the shares. Who claims the interest depends on your circumstances and should be confirmed with your accountant before borrowing.
Taking dividends as cash and paying them to the home loan speeds up the conversion. Whether that suits your plan is a question for your adviser.
Yes. The existing investment debt, rental income and security structure all form part of the lending review.
A real client file, published anonymously.
Read more →GuideWhat each ownership structure locks in.
Read more →GuideWhat selling does to tax and the loan.
Read more →
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3. Understood my needs to setup debt recycling to allow tax structuring.
4. Communicated well throughout.
I would use their services again.
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