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Understanding the Layout

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Sarah borrowed $700,000 at 5.8% to purchase an investment property that generates $650 in weekly rent, with tax-deductible interest. Next door, Marcus owes $18,000 across three credit cards at 20% interest, funding holidays and new furniture. Both have debt. Sarah is building wealth tax effectively, while Marcus is hemorrhaging money to interest charges.

The distinction between good and bad debt is defined primarily by mathematics and opportunity cost.

When borrowing builds wealth

Good debt has a simple litmus test. Does it generate income or appreciate in value faster than the cost of borrowing?

With the RBA cash rate now at 3.85% following February 2026’s increase1, investment property loans typically sit around 5.5-6.5%2. Yet this debt can still be “good” because:

  • The interest is tax-deductible: If you borrow to acquire an income-producing asset like a rental property or shares that pay dividends, you can claim the interest as a deduction3. At a 32% marginal tax rate (including Medicare levy), a $40,000 annual interest bill effectively costs you $27,200 after tax.
  • The asset (usually) appreciates: While property values fluctuate, Australian capital cities have historically delivered long-term growth that often exceeds borrowing costs.
  • Rental income reduces your net cost: A well-selected investment property with strong rental yield can be cash-flow neutral or even positive, meaning tenants are essentially paying down your debt while you build equity.

Business loans used to expand operations or investment loans used to invest in dividend-paying shares, can also qualify as good debt if structured properly, although they carry higher risk and require more sophisticated management.

Here’s the kicker. Good debt requires discipline. The moment you redraw from your investment loan to fund a European holiday, that portion becomes bad debt, the interest is no longer deductible because it’s not being used for income-producing purposes.

The true cost of consumer debt

Bad debt is borrowing funds for consumption rather than wealth creation. The average credit card interest rate in Australia currently sits around 18.5%4, with many rewards cards exceeding 20%.

Recent data shows the average unpaid credit card balance has jumped to $1,780, up 10% in just 12 months5. At 22% interest, paying this off over 24 months means you’d pay $436 in interest on top of the original $1,780 debt. That’s money that could otherwise have been building your emergency fund or contributing to super.

The psychology of consumer debt is insidious. Research shows people spend approximately 15-20% more when using credit cards versus cash, because the payment feels abstract. Then compound interest works against you. That $2,000 designer handbag purchased on a credit card becomes a $2,600 handbag if you only make minimum repayments over three years.

Buy Now, Pay Later services have added yet another layer. While technically interest-free if paid on time, late fees compound rapidly, and the ease of access can lead to over consumption.

Debt reduction strategies that work

If you’re carrying consumer debt, choosing the right payoff strategy can save thousands in interest and years of repayments.

  • The Debt Avalanche Method (mathematically optimal). List all debts by interest rate from highest to lowest. Pay the minimum amounts on everything and direct all extra funds to the highest-rate debt first. Once that’s cleared, roll that payment into attacking the next highest rate. This saves the most money in interest charges, costing you less in the long run, but requires discipline.
  • The Debt Snowball Method (psychologically powerful). Focus on paying off your smallest debt first, regardless of interest rate. Make minimum payments on all debts but put extra money towards the smallest balance. Once paid, roll the payment into the next smallest debt. Research in behavioural finance suggests that small victories lead to higher completion rates for many people, even if total interest paid is higher.

Which works better?

The one you’ll actually stick with. If you’re motivated by quick wins and need momentum, snowball it. If you’re disciplined and focused on reducing interest, use the avalanche. Some people even combine both, clear one small debt for the psychological win, then switch to the avalanche approach for remaining balances.

Your next move

Take 15 minutes this week to list every debt you carry, including the balance, interest rate, and whether it’s tax-deductible. Then ask yourself: “Is this debt making me money or does it cost me money?”

  • For good debt, ensure you’re making the most of any available tax benefits and that the underlying asset is performing.
  • For bad debt, choose a payoff strategy today and commit to it.

The difference between financial progress and financial stress often comes down to knowing which debt to embrace and which to eliminate aggressively.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

1 Statement by the Monetary Policy Board: Monetary Policy Decision | Media Releases | RBA

2 Best investment home loan rates in February 2026 | Finder

3 Interest on loans used to purchase income-producing assets like rental properties is tax-deductible. Only the portion of the loan used for investment purposes qualifies for the deduction.

4 https://www.canstar.com.au/credit-cards/national-debt-february-2025/

5 https://www.finder.com.au/news/australian-credit-card-debt-rise

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The sale you’ve worked your whole life for

For most business owners, the day you sell is the single largest financial event of your life. It’s the moment when decades of sacrifice, risk, and relentless effort are converted into a number. And yet, an extraordinary number of Australian business owners arrive at that moment underprepared, leaving significant money on the table through poor timing, avoidable tax, and no plan for what happens next.

With the right advice and enough lead time, a business sale can be structured to be extraordinarily tax-efficient, and the proceeds can fund a retirement that genuinely reflects the life you’ve built.

Valuation and timing: know what you’re selling before you sell it

Valuation is both a science and a negotiation. Australian small businesses are commonly valued on an earnings multiple basis, depending on the industry, business model, and the strength and transferability of earnings. The two variables that move that multiple most dramatically are how dependent the business is on you personally, and how predictable its revenue is. A business with recurring contracts, a capable management team, and documented systems commands a premium; one where everything runs through the owner commands a discount, or no buyer at all.

Australian SME valuations remained broadly stable through 2025 before softening slightly in the December quarter, suggesting that business owners who have been considering an exit should not assume current conditions will persist indefinitely1. Timing matters, both for market conditions and for your personal tax position.

Critically, start preparing three to five years before your intended exit date. Use that runway to reduce owner-dependence, clean up your financial records, resolve any legal or compliance issues, and grow earnings, all of which directly increase your multiple and your final sale price.

Tax structuring: the rules that can change everything

This is where financial and tax advice pays for itself many times over. The Australian tax system contains four small business CGT concessions that can dramatically, and legally, reduce the tax payable on a business sale:

  • 15-year exemption. If you have continuously owned an active business asset for at least 15 years, are aged 55 or over, and the sale occurs in connection with your retirement, the entire capital gain can be disregarded2. This is the most powerful concession available, and its interaction with the retirement definition requires careful planning.
  • Small business retirement exemption. allows business owners to disregard up to $500,000 of capital gains on active assets over their lifetime. If you’re under 55, the exempt amount must be contributed to super; over 55, you have the choice3.
  • 50% active asset reduction. This reduces an eligible capital gain by 50% after the general CGT discount, potentially in combination with other concessions4.
  • CGT cap contributions to super. Proceeds sheltered under the 15-year exemption or retirement exemption can be contributed to superannuation under a separate lifetime CGT cap of $1,865,000 (for 2025–26), entirely outside of the standard concessional and non-concessional contribution caps. This is one of the most significant super contribution opportunities available to any Australian.

The concessions can be combined and applied in a specific order to reduce a capital gain to zero in the right circumstances; however, the eligibility criteria are genuinely complex, and clients should consult their registered tax agent to confirm eligibility and assist with completing the CGT cap election form. Getting this wrong or missing a deadline is irreversible.

Transitioning proceeds into retirement income

Receiving a large lump sum and converting it into a sustainable, tax-efficient income stream is a genuine skill. Without a plan, the psychological shift from business owner to retiree, combined with an unfamiliar pool of capital, leads many people to make poor decisions.

Key considerations for structuring your proceeds:

  • Super first, where possible. Funds inside super benefit from earnings taxed at up to 15% in accumulation, and 0% once you commence an account-based pension. Ensure you make the most of your CGT cap contribution opportunity and any remaining concessional and non-concessional cap space before and after the sale is typically the highest-priority move.
  • Mind the transfer balance cap. The transfer balance cap of $2 million (for 2025–26) limits how much can be moved into the tax-free retirement phase of super. For business owners with large sale proceeds, this means a portion of funds will need to sit in either the accumulation phase or outside super entirely, in a well-structured investment portfolio.
  • Sequencing matters. The order in which you draw down different assets in retirement (super, investment portfolio, any vendor finance arrangements) has significant tax implications. A drawdown strategy built around your personal tax position, Age Pension eligibility, and longevity assumptions is essential.
  • Income replacement psychology. Business owners accustomed to reinvesting earnings often struggle to spend it in retirement. A cash flow plan that maps predictable income against anticipated expenditure helps create confidence to enjoy the wealth you’ve built.

Where a financial adviser can add value

The intersection of business sale, tax, super, and retirement planning is one of the most technically complex areas in all of personal finance. An adviser working alongside your accountant and solicitor adds value at every stage:

  • Pre-sale preparation (3–5 years out) Reviewing your business structure, ownership arrangements, and personal super balance to ensure you’re positioned to make the most of every available concession before a CGT event occurs. Restructuring after signing a sale contract is almost always too late.
  • Concession modelling. Running detailed scenarios across the four CGT concessions, individually and in combination, to calculate appropriate sequencing for your specific sale price, age, and super balance.
  • CGT cap strategy. Coordinating with your accountant on the CGT cap election form, contribution timing, and whether funds should enter super or remain outside, based on your transfer balance cap position and marginal tax rates.
  • Retirement income architecture. Designing a drawdown strategy across super, investment accounts, and any ongoing income sources that reduces tax, potentially enables Age Pension eligibility, and sustains the retirement lifestyle you’ve earned.
  • Behavioural support. The transition from business owner to retiree is as much emotional as financial. An adviser who understands this transition provides an anchoring perspective when the temptation to reinvest, spend impulsively, or underspend creates risks of its own.

The business you’ve built is your life’s work. The plan to sell it deserves the same care and expertise that built it.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

1 Bizval Indicator Report
2 Small business 15-year exemption | Australian Taxation Office
3 Small business retirement exemption | Australian Taxation Office
4 Small business 50% active asset reduction | Australian Taxation Office

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FAQ

What types of games are available at Vegas Wild Casino?

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