This young couple were winning on paper but losing in their gut. Both in senior roles, good salaries, owned their own home, and on top had a chunk of shares with their employer.

But underneath, they had a big non-tax-deductible mortgage, a rising tax bill, and a nagging fear that one wrong move could undo years of progress. They felt stuck between strategies, unsure what to do while markets moved around them.

The stress came from wanting to get ahead without sacrificing their lifestyle. The risk of a mistake kept them stuck in the inaction trap, which quietly cost them momentum.

But one smart move changed the script, and got what they already had to work harder. Their lifestyle stayed steady, while their results lifted.

How they got started

The first thing we did was to reframe their approach. Instead of following the conventional wisdom of paying off your mortgage, then investing, we used the assets they already had to invest now and make their money work harder.

They sold their employer shares strategically, used the fund to clear a large chunk of their home mortgage, and then used one of my favourite strategies to build investments and create tax deductions at the same time.

The power of debt recycling

Debt recycling turns non-deductible home loan interest costs into deductible investment interest, while at the same time you build a share portfolio and another income stream.

The short version is that you pay down your mortgage, and then withdraw the money and invest it into income producing investments like shares and ETFs. The magic of this strategy is that your debt levels stay the same, but over time your interest costs become tax deductible, delivering serious tax savings.

And this all happens while you pay off your home mortgage and build a share portfolio and another income stream at the same time.

There’s no loophole here, because the Australian tax law is built around how borrowed funds are used. Where you show any mortgage redraw went directly into income producing investments, the interest is generally deductible.

The rules are strict on evidence, but the benefits are worth the paperwork.

Worth noting this is a complex strategy with rules you need to be across and get right – it’s not typically a DIY strategy, consider getting some quality professional advice so you get the results you’re after.