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A Smarter Way to Structure Your Loans From Day One

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When it comes to property and investment finance, one of the most overlooked strategies is how you structure your loans upfront. Clients often tell us they wish they had planned better when they first took out their home loan—especially once they discover how loan structure can directly affect tax savings and future investment flexibility.

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Here’s a simple and highly effective way to future-proof your loans—especially when dealing with non-deductible debt like a home mortgage.

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The Problem With Rearranging Loans Later

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Let’s say you took out a $750,000 loan to buy your principal place of residence (PPOR). Over time, you manage to pay it down to $600,000. Later, you want to borrow for an investment property or shares—but your circumstances have changed.

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Maybe your income has decreased, your borrowing power is reduced, or the lender has tightened serviceability rules. Suddenly, it’s difficult (or impossible) to restructure or draw equity efficiently.

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The Better Approach: Plan at the Start

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Instead of taking out one big loan, split it into multiple smaller sub-loans right from the beginning. For example:

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• $75,000 – Split A
  
  
• $75,000 – Split B
  
  
• $75,000 – Split C
  
  
• $75,000 – Split D
  
  
• $450,000 – Split E
  
  

You can tailor the size of the splits depending on your comfort level or investment goals. Some clients set up even smaller chunks (e.g., $30,000) to make the process more flexible.

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How It Works in Practice

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Start by aggressively repaying Split A while keeping the other splits on Interest Only terms. Once Split A is paid down to zero, don’t close it. Instead, redraw funds from Split A for an investment purpose—such as a property deposit or investment-related expense.

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Now, the interest on this portion becomes tax deductible (assuming proper use and advice), and you’ve kept the borrowing purpose clean—no mixed loans.

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As you repay the next split (Split B), you repeat the process—effectively recycling your debt from non-deductible (home loan) into deductible (investment debt).

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Combine It With Other Tax Strategies

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This strategy works even better when combined with other smart planning:

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• Debt Recycling: Use repayments and investment income to pay down non-deductible splits and reborrow for investment.
  

• Borrowing for Investment Expenses: Rather than using cash for things like property management fees or rates, borrow through a clean split to maintain a clear deduction path.
  
  

For more info, you can explore strategies like debt recycling and borrowing to pay investment expenses on our blog.

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Structuring Tips

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• Use Interest Only for all sub-loans to give yourself maximum control and flexibility.
  
  
• Attach your offset account to just one split (e.g., Split A). Avoid using cash to repay the loan if you intend to reborrow later—just build up the offset balance instead.
  
  
• Avoid using offset cash for investing directly. Always redraw from the loan to maintain deductibility and avoid contaminating the purpose of the funds.
  
  

A Note on Investing in Shares

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If you’re considering using this strategy to invest in shares, speak with a licensed financial planner—they’re best positioned to guide you on asset selection. However, when it comes to tax strategy, interest deductibility, and loan structure, your accountant should be your first stop.

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Final Thought

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A well-structured loan strategy doesn’t just make life easier—it saves money, unlocks investment opportunities, and builds wealth faster. And the best part? It’s much easier to set up correctly at the start than to untangle later.

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If you’re buying a home, refinancing, or just thinking about investing, now is the time to get your loan structure right.

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Talk to PlanTax Before You Borrow

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We work alongside your mortgage broker or lender to ensure your loans are structured in a tax-smart way from day one. Already have a loan? We can still assess whether restructuring or splitting is an option for your situation.