A couple with a $1.26m home had four non-deductible debts across three lenders. We refinanced them to AMP under a $1,000,000 Master Limit, with a $402,000 investment split that can grow as the home loan is paid down.
Home › Case Studies › $402K on a Master Limit
A married couple with two children: an IT contractor in a permanent salaried role since March 2021, earning $281,060 a year, and a senior advisor with her employer since December 2015 on a base salary of $117,286.
They have long-term stability in their professions and a record of paying their home loan down, which has left them with significant equity. They live well within their means, with school fees, groceries and recreation their biggest expenses.
Their debt was spread across four facilities with three lenders, and none of the interest was deductible. Their equity was sitting idle.
Debt recycling is not a one-off transaction. Each time they pay the home loan down, they want to move that amount across to deductible investment debt, and with most lenders each of those moves means a new application.
| Item | Value | Facility | Purpose |
|---|---|---|---|
| Home | $1.26m | Home loan with their previous bank, around $533k | Non-deductible |
| Car | — | $40k car loan | Non-deductible |
| Credit cards | — | $15k across two cards | Non-deductible |
| Home equity | — | Nothing drawn | Unused |
The strategy depended on the Master Limit, a facility specific to AMP. Refinancing left the couple $324 a year worse off than their existing loan. Staying put would have meant going without it.
For debt recycling, that matters most. As the $588,000 non-deductible split falls, the couple can reassign that limit to the investment split without reassessment.
| Metric | Figure |
|---|---|
| Lender | AMP |
| Master Limit | $1,000,000 |
| LVR | 79.49% |
| Loan term | 29 years |
| Non-deductible owner-occupied split | $588,000 at 6.14% |
| Deductible investment split, initial | $402,000 at 6.59%, interest only for 10 years |
| Line of credit | $10,000 at 6.79%, interest only for 10 years |
| Debts consolidated | Home loan, $40,000 car loan, $15,000 across two credit cards |
| Cost compared with the existing loan | $324 a year more |
| Servicing position | Net surplus of over $3,000 a month |
| Future recycling | Investment split can grow as the home split falls, without reassessment |
The $402,000 investment split at 6.59% interest only generates $26,492 of interest in year one. Where that borrowing is used for income-producing investments, and with one partner on the top rate and the other on 30%, each plus the 2% Medicare levy, the anticipated combined saving is $10,464 a year.
| Figure | |
|---|---|
| Annual interest on $402,000 at 6.59% | $26,491.80 |
| Partner 1 marginal rate (45% plus Medicare levy) | 47% |
| Partner 2 marginal rate (30% plus Medicare levy) | 32% |
| Partner 1 anticipated saving (50/50 split assumed) | $6,225.57 |
| Partner 2 anticipated saving (50/50 split assumed) | $4,238.69 |
| Combined anticipated tax saving | $10,464.26 |
*Anticipated figures for year one on the stated assumptions, subject to confirmation by the clients' accountant. We are not tax agents.
See how we approach debt recycling loan structure and splits and which lenders support debt recycling.
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1. Arranged a loan when our small business situation made it difficult to qualify.
2. Met requirements to have funding available by a specified date.
3. Understood my needs to setup debt recycling to allow tax structuring.
4. Communicated well throughout.
I would use their services again.
Alex, Jess and the Kingfisher team were second to none and their process from start to finish was faultless. As a self-employed business owner, it can be difficult to obtain finance at the best of times. The Kingfisher team made this an easy and efficient proposition and their continued transparent and efficient communication ensured we were kept up to date at all times. Highly recommend them for your finance needs!
Alex and Jess dealt with our investment loan and provided a top tier service. They kept us up to date and communicated every step of the process making it a seamless and smooth experience! Awesome work team we will definitely be back for future loans!
Jess from Kingfisher was outstanding. I couldn't fault her communication, expertise or dedication to finding the best loan for our situation. The entire process was seamless from start to finish. We'll definitely be using Kingfisher again in the future. A top-tier organisation.
