Debt management advice for Australian households.
Most household debt advice is either fear-based or product-led. Neither helps. We work the numbers, set the repayment order, and tell you where leverage adds to wealth and where it does not.
Debt belongs on the same page as super and investing.
A household earning $250K with a $700K mortgage and a $200K super balance is one balance sheet, not three. Most debt advice gets sold by lenders. Most investment advice gets sold by planners. The two rarely meet.
At Opes, the planning practitioner and the credit representative are the same person. The advice considers what the loan does to your cash flow, your tax position, and your ability to keep contributing to super. A rough borrowing number can be sized in advance with the borrowing capacity calculator.
Six debt decisions, in order.
The right order changes with interest rates, your marginal tax rate, and what you own. The order itself is the thing most households are missing.
Repayment order
Highest-rate, non-deductible debt first. Usually credit cards and personal loans before the home loan, and the home loan before deductible investment debt.
Good debt vs bad debt
Debt against an income-producing or growing asset is different to debt against a depreciating one. The label is less useful than the interest rate and the asset behind it.
Consolidation
Folding short-term debt into a longer-term loan can lower the monthly payment but stretch the interest. Only useful where the cash-flow saving is reinvested or used to clear the debt sooner.
Offset and redraw
An offset against a home loan turns idle cash into a tax-free saving at the loan rate. Redraw does the same with different access rules. The choice has tax consequences if you ever rent the property out.
Debt recycling
Converting non-deductible home loan debt into deductible investment debt over time. Powerful when done carefully, dangerous when done as a slogan.
Debt in wealth building
Leverage is a tool, not a goal. We size it against the household's income certainty, time horizon, and tolerance for a bad year.
When leverage helps. When it does not.
Leverage amplifies whatever the underlying asset does. Against a growing asset and a stable income, it accelerates wealth. Against a flat asset or an uncertain income, it accelerates the damage. The factor that matters most is income certainty, not the loan rate.
We model the household at a 20% income shock and a one-percentage-point rate increase. If the plan still works at both, leverage has a place. If it does not, the loan is too big regardless of what the calculator says. Income certainty is the reason we also work through income protection cover on the same file as the loan.
- Income shock 20%
- Rate rise 1.0%
- Six-month income gap
- Property value 15% down
- Insurance claim scenario
- Retirement income gap
Frequently asked questions.
It depends on the interest rate, your marginal tax rate, and your horizon. Paying down a 6% home loan is a 6% tax-free return. Investing has to beat that on an after-tax basis to be the better choice. We work the numbers in writing.
Sometimes. The risk is rolling unsecured short-term debt into a 25-year home loan and paying interest on a takeaway meal for two decades. If you consolidate, the saved cash flow needs to go toward clearing the debt faster.
It is the deliberate conversion of non-deductible debt (typically a home loan) into deductible investment debt by selling investments, paying down the home loan, then re-borrowing to invest. It works for high-income households with a long horizon, and it requires care with the ATO's purpose test.
Yes. Opes holds a credit representative authorisation (CR 45250 of Outsource Financial) with access to a panel of 50+ lenders. Planning advice and loan arrangement sit in the same practice.
Continue reading
- Financial planning overviewThe pillar page. How a Statement of Advice is delivered.
- Finance brokingHome loans, investment loans, refinance. Same practitioner.
- Tax-effective investingDeductible debt and the structure it sits inside.
- Superannuation adviceWhere contribution levels sit in the cash-flow priority.
- SMSF advice and lendingLimited recourse borrowing and the rules around it.
Information on this page is general in nature. It does not take into account your personal objectives, financial situation, or needs. Read the relevant Product Disclosure Statement and consider whether personal advice is appropriate before acting on any information here.
Time to set the repayment order?
An initial conversation is free and obligation-free. Bring the loan statements and a rough monthly budget.