Good Debt (HDL) versus Bad Debt (LDL).


In the financial world, debt can be likened to cholesterol in the body. There’s Good Debt (HDL), which is beneficial and promotes growth, much like the healthy fats found in avocados. This type of debt is often associated with investments that not only appreciate over time but also offer tax deductions. Examples include loans for investment properties or business ventures.

Conversely, Bad Debt (LDL) is the kind that hinders financial progress, similar to the unhealthy fats in fast food fries. This includes high-interest debts from credit cards and personal loans, which offer no tax benefits and can quickly become financial burdens.

A home loan is a unique category. It’s not tax-deductible, yet it represents an investment that appreciates over time and is exempt from capital gains tax when it’s your primary residence. This makes it a strategic piece in the puzzle of long-term wealth building.

The Property Investment Path for Medical Professionals

At Bartons, we’ve been advising medical professionals for many years, and property investment remains a fundamental strategy for achieving long-term financial independence. The journey typically starts with an intern, fresh out of medical school, who’s eager to step onto the property ladder. Whether it’s a home to live in or an investment property, the key is to begin with the end goal in mind.

As medical professionals advance in their careers and specialisations, their income tends to increase, often substantially. This is particularly true after completing specialist training and entering fields such as consultancy or general practice. At this juncture, many look to upgrade to a family home that aligns with their new status and income level. It’s vital that their debt structures are adaptable to support this transition and each subsequent property purchase.

Evolving from Starter Home to Dream Home: Key Considerations for Doctors

When a doctor is ready to move from their first property to a more permanent residence, several financial concepts become crucial. Negative gearing is one such concept, where the costs associated with a property—primarily interest and depreciation—exceed the income it generates. This results in a reduction of taxable income, providing a tax advantage.

Depreciation is a non-cash deduction that can be claimed on a property over a 40-year period. However, this benefit is only significant if the property is relatively new. For example, a property built in 1940 would have exhausted its depreciation benefits, whereas a newly constructed property offers a full 40-year depreciation schedule.

Maximising Tax Efficiency with Offset Accounts

Offset accounts have emerged as a game-changer in managing property-related finances. By depositing surplus funds into an offset account rather than directly into the home loan, homeowners can save on interest payments while retaining the flexibility to invest in future properties. This strategy is particularly beneficial when upgrading to a larger home, as it allows for the efficient use of funds without affecting the tax-deductible status of the investment property loan.

Concluding Advice for Medical Professionals on Their Property Journey

Bartons takes an integrated approach, facilitating communication between accountants and lenders to ensure a comprehensive understanding of the tax implications of borrowing. For medical professionals in the early stages of their careers, it’s advisable to leverage offset accounts rather than aggressively paying down the home loan. This strategy can help to manage significant property-related expenses, such as stamp duty and real estate fees, and ensures the proper structuring of debt for future investments.


This information is general advice only and does not take into account your objectives, financial situation and needs.  Before making a financial decision based on this advice, you must consider whether it is appropriate in light of your needs, objectives and financial circumstances, and where relevant, obtain personal financial, taxation or legal advice.  Where a financial product has been mentioned, you should obtain and read a copy of the Product Disclosure Statement prior to making any decisions.