RSM Australia

Debt management

Why is managing your debt so important?

For most Australians owning their own home is one of their top priorities for them and their family. Debt however can also be used in different ways to assist with wealth creation, retirement planning, business startups and growth and to help you move capital purchases to an expense purchase through leasing and hire arrangements.

Effectively planning around why and how you establish loans can be the difference between managing your debt or your debt managing you.

What is important when using debt to achieve a lifestyle, investment or business related goal is that the structure and level of the finance been used is appropriate.

There is also the consideration of which entity, e.g. person, company, trust etc, the finance (loan) should be owned by and responsible for the loan, and not forgetting the implications of tax.

There are a numerous key considerations when using finance that should be evaluated, depending on the purpose and ultimate objective of the debt. 

Home loans – 

One of the largest financial commitments you will likely make will be the purchase of your own home. This is a dream for most, with the hope of a great lifestyle being created and memories being made under the roof you will hope to call your own.

A home loan is in general not tax deductible, which means that all the interest you have to pay cannot be claimed as an expense against your personal earned income.

For this reason home loans often become the focus of people’s financial commitments and budget to take ownership of their home sooner and reduce the amount of interest paid.

Ensuring that your debt management plan, which includes budgeting and cash flow, is reviewed regularly is vital to the achieving your ultimate dream, effectively. 

Investment loans –  

Many Australians will use investment loans to create additional wealth for themselves as part of their overall wealth creation and management plan. Investment loans can be used to purchase residential or commercial property, or other investments such as stocks and shares.

These types of loans are generally tax deductible, which means that the interest you have to pay can be claimed as an expense against your personal earned income, or the earned income of the person or entity that owns the debt and asset(s).

Borrowing to invest, often referred to as ‘gearing’ or ‘leveraged investment’, has a number of risks associated with it. However, the impact of having the additional capital to invest can also have some significant benefits.

When borrowing to invest, there are a number of key factors to consider including:

  • investment risk
  • cashflow
  • realistic anticipation of future investment returns
  • costs to setup and manage
  • personal risk
  • ownership structure and tax

How we can help

The best course of action is to speak with us to review your current debt financing plans and goals to determine exactly where you currently are. We can then work together to make any necessary changes to enhance the outcome for you.  That will give you great confidence in your future.

Our services

RSM can offer you a personalised service in the areas of debt financing and debt management:

  • margin lending (listed investment financing)
  • debt structuring for tax efficiency (debt recycling)

Personal Financial Advice Services is provided by RSM Financial Services Australia Pty Ltd (AFSL 238282)

Everyone’s circumstances are different and this website doesn’t take into account your personal circumstance, it is therefore important that you consider the above in light of your financial situation, needs and objects, and seek financial advice before implementing a strategy.

Investment and broader financial planning implications

thinkBIG 2018 Superannuation whitepaper: discussing the real impact of the overhaul to the superannuation system - what now?
28 March 2018

The Yin Yang of cash and its effect on income for investors

The Yin Yang, a symbol of two opposite yet complimentary energies is a concept that plays a significant role in the lives of millions of Australians who are reliant on cash for income in retirement.
20 February 2018

The 3 Myths we are sold about the benefits of low-interest rates for Australians.

We all love the thought of low-interest rates generally because for us consumers it effectively lowers the cost of our monthly loan repayments. But what if what you gained on the front end, you were losing on the backend?
13 February 2018

Invest regularly and ease your stress of market volatility

If you’re an investor considering entering the market with your hard-earned savings you may feel a little uneasy about placing a large lump sum into the market all at once. Especially when you think it could experience an extended period of market volatility.
14 November 2017

Fundamentals of Financial Success | Pillar 2 – Personal risk

As discussed in part one of the series The Six Fundamentals of a Strong Financial Plan, it's important to remember that there are always going to be events that are happening locally or internationally that will impact financial markets.
18 October 2017

Budget 2016 for Individuals

Key announcements There are very few Budget measures impacting on personal income taxes for individual taxpayers and families.  The key change for individuals is an increase to the threshold at which the 37% marginal tax rate for individuals commences.
3 May 2016

This article has been prepared by RSM Financial Services Australia Pty Ltd ABN 22 009 176 354, AFS Licence No. 238282.

As everyone's circumstances are different and this article doesn't take into account your personal situation, it is important that you consider the above in light of your financial situation, needs and objectives, and seek financial advice before implementing a strategy.
View the Financial Services Privacy Statement and Policy and Financial Services Guide

Key contact

Rod Edwards
National Head of Financial Services

T: +61 8 9261 9100
[email protected]