Recycling savings, a bonus or an inheritance? See the deductible debt it creates, the after-tax interest cost and whether expected income covers it.
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Home › Calculators › Lump Sum Debt Recycling Calculator
The lump sum goes onto your home loan first. You then borrow the same amount back through a separate investment split and invest it. Total debt is unchanged, but that slice is generally deductible because it funds income-producing investments.
The calculator shows one year on that slice:
It leaves out growth, franking credits, fees and rate changes.
Interest and income are taxed at the same marginal rate, so the result turns on yield against loan rate. On income alone, the break-even yield is the loan rate.
With the defaults, $50,000 at 6% costs $3,000 a year, or $2,040 after a 32% deduction. A 4% yield brings in $1,360 after tax, a shortfall of $680 a year that you fund from cash flow and expect growth to cover.
A shortfall is normal for growth-focused investments. The test is whether you can carry it and whether growth clears it; the hurdle rate calculator adds growth to the sum.
The alternative is to leave the lump sum in an offset account. That saves interest at your home loan rate, tax-free and with no market risk: $3,000 a year on $50,000 at 6%.
Recycling captures the same home loan saving, then adds a deductible loan and an investment. With the defaults it comes out ahead of the offset only if growth beats the $680 shortfall. You also give up instant access to the cash, which an offset keeps.
Keep the cash in offset if you may need it within a few years, if your income is uncertain, or if the shortfall would strain your budget. An emergency buffer belongs outside the strategy.
Order matters too. Investing straight from the offset creates no deductible debt, and redrawing from a split that also holds private debt can make the interest only partly deductible. Our guide to the redraw contamination trap shows the clean sequence, and your registered tax agent confirms the treatment.
Alex can check your loan, your equity and your borrowing capacity, and tell you what the lending side would look like.
Request a call with Alex →Offset gives a risk-free, tax-free saving at your home loan rate and keeps the cash available. Recycling adds a deductible loan and an investment, so it only pulls ahead if after-tax returns beat the after-tax interest. Many people keep an emergency buffer in offset and recycle the rest. Your financial adviser can help weigh the investment side.
Generally yes, when the borrowed money is used to buy income-producing investments and the loan is kept separate from private debt. The order matters: pay the home loan down first, then borrow back through a clean investment split and invest directly from it. Your registered tax agent confirms the tax treatment for your situation.
Often, if your current lender allows a new split on the existing loan. Some lenders handle this with a simple variation, others require a fresh application or do not offer the feature you need. Policies vary and change, so we check what your lender allows before suggesting a refinance.
How savings, bonuses and windfalls are recycled step by step.
Read more → GUIDERisk-free offset savings compared with recycling into investments.
Read more → RESOURCEThe order of steps that keeps a recycled lump sum deductible.
Read more →
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.
