But an even bigger thing to look at is debt recycling, which is particularly useful for someone who inherits a large sum or simply has some spare cash. Here’s how that works. If someone has a home loan and $500,000 in a bank account, they could take $499,999 of that money and put in their home loan. They could then redraw the entire amount and use that money to buy an investment such as a share portfolio. “That means that all the interest costs on that debt are then fully tax-deductible because it’s for investment purposes. And so you’re talking about a really significant tax deduction. If you think the average mortgage size in Australia is like $700,000-odd, then $40,000 a year of the interest on that could then become tax deductible,” Nash says. “It’s a great strategy. It’s one that we use quite a lot with our clients, particularly the higher-income earners.”
If you want to get just how rigged the tax system is for the rich, have a read of this tip from the AFR "wealth reporter"
