Context beats fear — every time. Once you see common debt myths for what they are, the decisions that felt risky start to look obvious, and the “safe” ones start to look expensive.
Most common debt myths survive not because they’re true, but because they’re simple. A slogan travels faster than a spreadsheet. “Debt is bad” fits on a fridge magnet; “the deductibility, rate and asset behind a debt determine whether it builds or drains your wealth” does not. For high-earning professionals, that gap between simple and true is where a great deal of money quietly goes missing.
This is an education piece, not a sales pitch. The aim is to give you the framework that financial advisers actually use, so you can pressure-test the debt myths you’ve inherited. We’ll move through the most common ones, explain the mechanics, and show where each falls apart under scrutiny.
It matters more than usual right now. With the RBA holding the cash rate at 4.35% in June 2026 — and the next meeting still “live” for another move — debt anxiety is loud. Loud isn’t the same as correct. Let’s replace volume with structure.
The opposite of reckless borrowing isn’t no borrowing. It’s structured borrowing — debt with a purpose, a buffer, and a tax position that works for you instead of against you.
How to read any debt — the three questions
1. What’s the rate?
22% consumer debt and a 6.2% mortgage are not the same animal.
2. Is it deductible?
Investment-purposed debt is tax-deductible. Consumer debt never is.
3. What’s behind it?
An appreciating asset? Or a depreciating one — or nothing at all?
Answer these three, and almost every common debt myth resolves itself. The slogan can’t survive the questions.
Debt-free feels like a finish line. For most professionals, though, it’s the wrong race. The actual goal is net wealth and reliable cash flow — and being debt-free is neither necessary nor sufficient for either. You can be entirely debt-free and asset-poor. You can also carry significant structured debt and be genuinely wealthy.
The distinction is the type of debt. Clearing bad debt — credit cards, BNPL, personal loans — absolutely is a goal; that debt only drains you. But aiming to eliminate good debt (a sensible mortgage) and refusing to ever take on smart debt (investment borrowing) means optimising for a feeling rather than an outcome. Context beats the slogan.
The Reality
Eliminate bad debt — that’s a real goal. But “debt-free” as a blanket target optimises for comfort, not wealth. Wealthy households aren’t debt-free; they’re debt-structured.
Two errors live inside this one common debt myth. First, negative gearing isn’t a loophole — it’s simply the ordinary rule that you can deduct the cost of earning assessable income, including borrowing costs. Second, and more often missed, it applies to both property and shares. A geared share portfolio works on exactly the same principle as a geared rental.
Used well, it’s a legitimate and powerful lever in the accumulation years — roughly the ten-to-twenty before retirement — for higher-income earners who hold a genuine emergency fund and a real savings buffer. Used carelessly, it’s just a way to lose money with a tax discount. The structure is everything. You can review the official position on investment income deductions directly with the ATO.
The Reality
Negative gearing applies to property and shares alike. It’s a genuine accumulation-years lever for high earners with buffers — not a property-only trick, and not free money. The deduction only helps if the underlying asset is worth holding.
This common debt myth gets the mechanics backwards. Franking credits exist to prevent the same company profit being taxed twice. Crucially, they benefit lower-income earners and self-funded retirees the most, because their marginal tax rate sits below the 30% company rate — so they receive a refund of the difference.
For a high-income professional on the top marginal rate of 39–45% (including Medicare), franking credits don’t hand you a windfall at all. You still pay top-up tax on the gap between the company rate and your own. On a grossed-up dividend yield of around 5.7%, that distinction changes how a high earner should think about Australian shares versus other assets — and it’s the opposite of the slogan.
The Reality
Franking credits help lower-income earners and self-funded retirees most. Top-rate earners (39–45%) still pay top-up tax. The grossed-up yield of ~5.7% matters — but the “rich windfall” framing is simply wrong.
The 30% rule is one of the most-repeated common debt myths in Australian finance. It’s a useful guardrail for households where every dollar is committed. It is far less useful for a high-income professional household, where it can quietly hold you back from sensible decisions.
Here’s why. When your income is high, a much larger share of it is discretionary — so the same percentage on housing leaves vastly more breathing room. A realistic cash-flow ceiling for high-income households often sits closer to 50–60% of net household income across total commitments, provided the buffers are real. The borrowing rules are guides, not commandments. Some can be deliberately stretched — with the right structure behind them.
The Reality
The 30% rule is a guardrail, not a law. High-income households can often run a cash-flow ceiling of 50–60% of net income across commitments — when buffers and structure are genuinely in place. Rules are guides; some are meant to be stretched.
Even people who like debt recycling often describe it wrongly — which is its own kind of myth. Debt recycling does not turn bad debt into smart debt. It converts good debt into smart debt: it takes your non-deductible home-loan debt and progressively replaces it with deductible, investment-purposed borrowing of the same size.
The distinction matters because it tells you the prerequisite. You don’t start debt recycling by clearing your credit cards through it — bad debt should already be gone. You start from a position of good debt and a stable buffer, then methodically shift the tax character of that debt. On a benchmark PPOR mortgage of around $650,000, the long-run effect can be substantial. Done without buffers, it’s just risk. We unpack the full mechanics in Turn Your Mortgage Into a Quiet Wealth Engine.
The Reality
Debt recycling converts good debt into smart debt — not bad into smart. Clear the bad debt first, build a buffer, then shift the tax character of your existing mortgage. Sequence and structure are the whole game.
Common debt myths, side by side
Here’s the whole framework in one view. Notice the pattern: every myth flattens a nuance, and every reality restores it. That’s what thinking differently actually means in practice.
Thinking differently, in practice
Notice what these common debt myths have in common. Each one replaces a question with a rule. “Is this debt deductible, at what rate, behind what asset?” becomes “debt is bad.” The professionals who build real wealth simply refuse to make that trade. They keep asking the three questions long after everyone else has reached for the slogan.
You don’t need to become a tax specialist to do this. You need a framework and, at the genuinely consequential moments, a second set of eyes. June is the natural time to apply it — a structural review before June 30 is worth far more than a scramble after it.
If you want to go deeper on the mechanics behind any of these, Victor covers the structural side of borrowing and investing in detail on the Elevate Your Wealth podcast. The framework is free. Applying it to your specific numbers is where an adviser earns their keep.
🎧 Prefer to listen? Catch this episode on the Two Incomes, One Plan podcast — the audio version of this article.
About the author
Victor Idoko — CFA · CFP · M.Com (Finance) — is the founder and principal adviser of CFV Advisory, where he helps high-earning Australian professionals turn strong incomes into structured, lasting wealth. He is the author of 7 Basic Wealth Strategies and host of the Elevate Your Wealth podcast.
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Pressure-test your own assumptions
You now have the framework. The next step is applying it to your actual income, debt and tax position — where context genuinely beats fear.
No obligation — just a conversation about your numbers.
This article contains general information only and does not take into account your objectives, financial situation or needs. It is not personal financial advice. Before acting on any information, consider its appropriateness to your circumstances and seek professional advice. CFV Advisory operates as an authorised representative under the appropriate Australian Financial Services Licence. Taxation strategies including negative gearing, franking credits and debt recycling carry risk and are subject to legislation, which may change.