Debt Recycling Calculator
Compare private debt, investment borrowing and cash movements under your annual debt-recycling steps.
Starting balances
Annual cash plan
Rates and assumptions
Applied to investment interest only when Entered rate is selected.
Results
Correct the marked input to calculate the comparison.
Private debt after the plan
$484,787
Net position difference
-$3,032
Recycling minus no recyclingInvestment debt
$100,000
Investment value
$121,173
Cash retained
$0
Unspent budget plus entered tax effectsBoth plans receive $300,000 of external cash over 5 years. Recycling interest is $184,287 and transaction costs are $500. Unfunded interest is $0.
Net position over time
Investments plus retained cash, less debt and unfunded interest. Home value is excluded equally.
After 5 years, recycling changes the net position by -$3,032.
Equal cash-budget comparison
| At plan end | Recycling | No recycling |
|---|---|---|
| Private debt | $484,787 | $473,870 |
| Investment debt | $100,000 | $25,000 |
| Investment value | $121,173 | $38,288 |
| Cash retained | $0 | $0 |
| Interest cost | $184,287 | $173,870 |
| Transaction costs | $500 | $0 |
| Entered tax effect | $0 | $0 |
| Unfunded interest | $0 | $0 |
| Net position | -$463,614 | -$460,582 |
Annual repayment and redraw ledger
Available is this year's private principal repayment after interest and costs.
| Year | Budget | Available | Redraw | Private debt | Investment debt |
|---|---|---|---|---|---|
| 1 | $60,000.00 | $22,275.00 | $15,000.00 | $577,725.00 | $40,000.00 |
| 2 | $60,000.00 | $22,636.50 | $15,000.00 | $555,088.50 | $55,000.00 |
| 3 | $60,000.00 | $23,019.69 | $15,000.00 | $532,068.81 | $70,000.00 |
| 4 | $60,000.00 | $23,425.87 | $15,000.00 | $508,642.94 | $85,000.00 |
| 5 | $60,000.00 | $23,856.42 | $15,000.00 | $484,786.52 | $100,000.00 |
Annual investment and cash movements
| Year | Interest | Cost | Tax effect | Investment value | Cash |
|---|---|---|---|---|---|
| 1 | $37,625.00 | $100.00 | $0.00 | $46,500.00 | $0.00 |
| 2 | $37,263.50 | $100.00 | $0.00 | $63,825.00 | $0.00 |
| 3 | $36,880.31 | $100.00 | $0.00 | $82,016.25 | $0.00 |
| 4 | $36,474.13 | $100.00 | $0.00 | $101,117.06 | $0.00 |
| 5 | $36,043.58 | $100.00 | $0.00 | $121,172.91 | $0.00 |
Stress the assumptions
Each case reruns both plans with the same external budgets.
| Scenario | Net difference | Unfunded interest |
|---|---|---|
| Entered assumptions | -$3,032 | $0 |
| Growth up to 2 points lower | -$6,279 | $0 |
| Loan rates up to 2 points higher | -$4,431 | $0 |
| Redraw fee up to $100 higher | -$3,596 | $0 |
Following Each Recycling Step
The debt recycling calculator first uses your annual cash budget to pay interest on both opening loan balances. It then pays the recycling cost and reduces private principal. The investment redraw is a separate borrowing, capped at that year's private principal repayment.
Each annual row has its own cash budget and planned redraw. Enter zero redraw for a year without recycling. Unused repayment capacity does not carry forward as a later redraw entitlement. Actual lender limits and required repayment dates sit outside this annual model.
For a hypothetical $300,000 private loan at zero interest, a $10,000 budget repays private debt to $290,000. A separate $10,000 redraw creates $10,000 investment debt and buys $10,000 of investments. Total debt remains $300,000. The no-recycling plan owes $290,000 and has no new investment. Both net positions are minus $290,000 before costs or returns.
In the displayed starting example's first year, interest is $37,625.00 and the transaction cost is $100.00. The $60,000.00 budget leaves $22,275.00 for private principal. The $15,000.00 redraw increases the investment split, while private debt ends at $577,725.00.
Comparing the Cash Flows
Both plans receive the same external cash each year. The no-recycling plan pays interest and applies the remainder to private debt. Recycling costs reduce that year's repayment capacity. Cash left after private debt clears stays in a reserve that earns no return.
Capital growth applies to the opening investment value. A year-end redraw starts earning growth the following year. The model excludes cash distributions, tax on investment returns, capital gains tax and investment management fees. Enter capital growth after ongoing investment costs. It does not model an after-tax sale value.
With zero rates and returns, recycling alone creates no net gain. If the $10,000 investment falls 10% in the following year, its value becomes $9,000 while the borrowed $10,000 remains owed. The net position is $1,000 worse than no recycling.
The stress table lowers growth, increases both borrowing rates and increases the transaction cost in separate cases. A cash budget below interest creates an unfunded amount. The model reports that shortfall and deducts it from net position. It assumes no automatic capitalisation or extra borrowing to cover it.
Moneysmart's borrowing-to-invest guidance explains how borrowing amplifies losses and why repayments continue when investments fall. Use the annual ledger to compare the cash commitment as well as the investment value.
Tax Assumptions and Separate Splits
No tax effect is the default. Selecting Entered rate multiplies investment interest by your chosen percentage. The estimate accumulates as retained cash at each year end. It never also funds private repayments or buys investments.
This arithmetic does not establish a tax deduction or a refund. The model applies the same assumption to any opening investment borrowing in both plans. It excludes tax brackets, offsets, levies and the timing of an actual tax assessment.
The ATO's ruling on redraw facilities treats redraws as separate borrowings and considers how the borrowed funds are used. A mixed-purpose account can require interest apportionment. Calling a split an investment loan does not establish deductibility.
Keep the repayment, new borrowing and investment purchase separately traceable. Ask the client's qualified tax adviser to confirm the purpose and tracing of each borrowing before applying any deduction assumption. The debt recycling guide explains the strategy beyond this hypothetical cash ledger.