How a debt optimisation strategy works

Business Development Specialist - Ceebeks Business Solutions for GOOD

Check this formula out!

Business + Home Loan = Debt Optimisation Strategy

You might be wondering what the above equation means.

Well, many of you have a small business and some of you also have a home loan but did you know that with the right structuring of these two by using a debt optimisation strategy you can not only own your home sooner but at the same time pick up a tax deduction along the way.

Let me explain this concept further …

Debt optimisation (sometimes referred to as “Debt Recycling”) is a financial strategy which creates wealth over time and improves an individual’s debt structure. In the majority of cases, this is achieved by:

  • Using all surplus income to reduce the home loan (non-tax deductible “bad debt”);
    • Creating or increasing investment debt (tax deductible “good debt”) by drawing against equity in the home using a special loan product; and
    • Using this borrowed money to build an investment portfolio.

The strategy can be adapted to suit different goals and time horizons, however, it is important to note that borrowing money to invest and budgeting are the key components.

Many small businesses that are well run, are flushed with cash at different times of the year. If your business structure allows you to periodically transfer cash out, without any tax consequences, this cash could then be used to reduce your home loan to increase your ‘equity’ – the portion where the market value of your home exceeds your home loan. The special loan product that is set up for the debt optimisation purpose then allows that part of your equity up to your mortgage limited to be drawn out and used for investment purposes, say by a loan back to your business – making the interest on this part of the loan tax deductible!

The non-deductible debt has now been converted into tax-deductible debt and, the best part of this strategy yet, the tax man now gets to start helping you pay down this loan.

Now, this is general advice and this strategy is not for everyone. For example, some home loans might be fixed and a break-fee will be charged if this loan is changed etc.

But if you would like to know more about debt optimisation and how it might apply to your own personal situation contact us  today, and we can arrange a meet up to discuss this.

Have a great day!

Chris Beks

Business Development Specialist - Ceebeks Business Solutions for GOOD

I love business and the ability to change people’s lives through them!

At Ceebeks Business Solutions for GOOD, we get up every morning to positively impact young families in business by making their businesses REALLY work so that we all make an even bigger impact together. The rewards that bring allow our team ('the fantastic five') to make small but powerful contributions to impact our local community, our country and the lives of those less fortunate around the world.

You see, something quite remarkable happens when we work together, for example, the gift of water is made when we prepare a tax return, the gift of a goat is provided when we help a new business start-up, the gift of shelter is forwarded when we organise a home loan. When we work together, we actually change the world!

I am a business development specialist with nearly 40 years’ experience, a CPA, an authorised representative of Avana Financial Solutions Ltd (Authorised Representative no. 231937) and a credit representative of Outsource Financial Pty Ltd (Authorised Representative no 396061). I have recently co-authored an International Best-Selling Book 'Legacy - The Sustainable Development Goals in Action' and in 2020 published my first book - 'Chasing the Dream! - How to Grow a Business in these Amazing Times', host a daily blog/vlog on our small business Facebook community group page 'Chasing the Dream, and with our Team run a monthly event for small business owners called 'The Chasers Meet-Up', where a guest speaker presents a topic and tips and strategies are openly shared.

In 2015, our business won the Change GPS International Member Firm of the Year and in that same year, I was a founding member of the Global Accounting Movement - Accountants for Good. We were recognised in 2016 by Steve Pipe in his international publication - The World's Most Inspiring Accountants and Featured in "The LinkedIn PlayBook" by world-renowned social media strategist and consultant, Adam Houlahan. In 2017, we were in the Top 25 Most Popular Accounting and Tax Services Award for search4accountants, B1G1 Business for Good Top 100 Giving Businesses in the World and a Semi-Finalist in the 2017 Victorian Regional Achievement and Community Awards. In 2018, we were an Australian Accounting Awards Finalist in "Community Engagement Program of the Year", a Semi-Finalist in the Victorian Regional Achievement and Community Awards 'South West TAFE & Deakin University South West Regional Achiever Award', a Nominee in the Victorian Regional Achievement and Community Awards 'Regional Development Victoria Business Achiever Award', and featured in the Top 25 Most Popular Accounting and Tax Services Award by search4accountants.

Ceebeks Business Solutions for GOOD