Not all debt is created equal. The interest on your home loan is not tax deductible — but the interest on an investment loan is. Here's why that matters.

Not All Debt Is Created Equal

The interest you pay on your home loan — the house you live in — is not tax deductible. You can't claim it, just as you can't claim your rates or insurance. Accountants call this "bad debt".

The interest you pay on a loan used for investment purposes — an investment property or shares — can be claimed as a tax deduction. This is "good debt".

A More Honest Way to Think About It

Calling investment debt "good" is a stretch. Why would you pay a dollar in interest just to save 30 cents in tax? There's no such thing as truly good debt. A more accurate framing is "bad debt" and "worse debt" — and when you have both, it makes sense to focus on paying off the one with no tax benefit first.

Tax-Deductible Debt (Good Debt)

Investment home loan
Margin loan (for shares)
Business loan
Business car lease

Non-Deductible Debt (Bad Debt)

Your home loan (owner-occupied)
Personal loan
Car loan
Credit card
Buy Now Pay Later
HECS/HELP

Why This Matters for Your Strategy

If you have both types of debt, most accountants would suggest you pay the minimum on the investment loans (keeping the tax deduction maximised) and throw every spare dollar at your home loan.

This is also why offset accounts are so important. Money in an offset reduces the effective interest on your home loan without actually reducing the loan balance — preserving your ability to claim the full deduction if the property ever becomes an investment.