Cut Your Tax Bill with Your Mortgage! Aussie Tax Hack you should know

⚠️ Did you just get a MASSIVE bonus or commission check? Don't let the ATO take 45% of it! 

This Aussie tax strategy could save you tens of thousands.

In this episode of The Mortgage Chat, I break down a powerful, but often misunderstood, strategy that helped my client reduce his tax liability by over $43,000 on a one-off commission. 

If you're a high-income earner, especially in sales or a commission-based role, and you've had an unexpectedly large payday this financial year (a 'first-world problem' we all wish we had!), this video is a must-watch.

The strategy? 

Using an Interest in Advance Loan on an investment property. 

This allows you to prepay the next financial year's tax-deductible interest this financial year. By paying $97,200 of 2026's interest in 2025, my client was able to significantly reduce his taxable income, pushing a large chunk of his one-off commission out of the 45% tax bracket. We dive into the specific numbers, showing you how $150,000 in income exposure was reduced to just $52,800, leading to a huge tax saving.

Important Caveats: 

This strategy is primarily for investors who expect a high-income year followed by a lower-income year. I also discuss the main downfall—the risk of paying a higher interest rate if rates drop in the following year. As always, this is not tax advice; you must consult with your Australian Accountant before proceeding.

Watch the video to understand how this advanced strategy works and determine if it's the right move for your investment portfolio in Australia. Don't leave money on the table for the tax man!

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Chapters

0:00 Introduction & The $45,000 Tax-Saving Story
1:17 Who is at risk of the 45% tax bracket in Australia?
2:52 What is an Interest in Advance Loan?
3:56 How a $150,000 bonus created a tax killer
4:41 The Interest in Advance Loan Strategy: The Numbers
5:20 The 'Negative Gearing' Concept Explained
5:34 The Tax-Saving Result: How we saved over $43,000
6:58 The Biggest Downfall of an Interest in Advance Loan
7:36 Final Warning: Is this strategy right for you?

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Transcript

0:00

so the biggest downfall with doing an interest in advance loan is the rates when we done the interest in advance loan in 2025 the rates was 6% now it's 2026 and guess what the rates dropped 25 points so before I break it down I wanna tell you what a interest in advance loan is this is generally done if you earned a massive income bonuses commission for that financial year for that financial year you're not gonna earn as much of a income the following financial year I just received 150 thousand dollar commission check I should be happy but guess what I still got a big tax liability I just helped one of my clients reduce their tax liability by just under 45,000 dollars and I'll show you how I've just done it I'm your host Tony Shah and thanks for joining me on another episode of the Mortgage Chat so how did I just help my client reduce his tax liability by just under $45,000 so before I break this down anymore I want you to understand this is gonna be a first world problem where my client has earned more than $190,000 and that puts him up at the top of the tax bracket alright so any dollar he earns above 190,000 he's gonna get taxed 45% alright so I earn a dollar I keep 50 cents and I gotta pay 45 cents in taxes which is a bit draining okay so what we've done here is we try to reduce his taxable income as much as possible so he doesn't have to fork out that 45% tax and what we've recommended working with his accountant is we offered him a interest in advance loan but not as much people do this because they don't understand how it works and today I'm gonna break it down for you how we just reduce his taxable income and his tax liability by just under $45,000 and let's break it down so this client of mine he's in sales and he's always earned around 200 two hundred and twenty thousand dollars a year now his base salary was around 120 thousand dollars so anything he earned above that was always commission cause he's always in the sales role now however last financial year in 2025 he closed a massive deal where he got paid an extra $150,000 in bonuses slash commission so his normal salary including commissions always around $200,000 220 but now his taxable income I'm sorry so his taxable income so his income earned so his income earned from this so his income earned excluding this hundred and fifty thousand dollars for 2025 financial year was two hundred and ten thousand dollars but this massive check came in midway through the financial year was a hundred and fifty thousand so this hundred and fifty thousand plus the other twenty thousand that he made on top of the hundred ninety five thousand hundred$90,000 he had to pay 45% tax on it which is a big killer so what we did is we done an interest in advance loan to reduce his taxable income and that's how I reduce his tax liability by just under $45,000 OK so before I break it down I wanna tell you what an interest in advance loan is this is generally done if you earned a massive income bonuses commission for that financial year you're not gonna earn as much of a income the following financial year okay now so what I'm interested in advance loan is I'm gonna pay my interest the following year forward so for example when we done the interest in advance loan for our client it was a 2025 financial year but what we've done is we restructured this loan and we paid all the interest that he was gonna get charged in 2026 forward in 2025 and why do we do that because all his investment loans the interest charge is tax deductible therefore it allows me to reduce his taxable income okay and that's how we're able to save a lot of taxes for him and I'm gonna show you what we've done for him with his accountant now I'm not a tax accountant and if you wanna go down the interest in advance loan you should always talk to your accountant before you proceed with this restructure and wanna pay the interest upfront one year forward so everybody if you're just listening this podcast please just jump onto the YouTube video because I got a whiteboard right here that breaks down a little bit more for you okay so as I mentioned before without that massive commission check his taxable income for that financially was around $210,000 so anything above $190,000 he was gonna get taxed 45% especially that hundred and fifty thousand dollars he received he was gonna get tax 45% as well so for that $20,000 that he made above 190 at 45% he was gonna get tax nine grand for it okay and on that hundred and fifty thousand at 45% he was gonna get tax $67,500 for it alright and that's actually a lot of money taken out of his paycheck when he got paid that hundred and fifty thousand dollars right look that nine grand give or take whatever it is right but that one fifty that's the killer right there so how do we reduce his taxable income and reduce this tax liability okay so what we did was we done that interest in advance loan where we paid all the interest in 2026 financial year in 2025 so his loan amount was $1.62 million at 6% okay so the total interest that he was gonna get charged for the 2026 financial year was gonna be $97,200 so what do we do here we actually paid all this in 2025 financial year so that minus that equals to 52,800 because I've actually paid all that interest in advance therefore because it's an investment charge it's for investment purposes I'm actually allowed to claim this back to reduce my taxable income OK for people that have investment loans out there it's pretty much what you call negative gearing right so you can claim a lot of these um so you claim a lot of the interest back because your interest charge outweighs the rental income received therefore anything that you paid above that reduces your taxable income alright so therefore instead of getting tax at $150,000 he's gonna get tax $52,800 alright so I can see here the difference now is at 45% at 52,800 your tax liability would only be $23,760 so that's a big difference of around $43,740 okay and therefore because we restructured his loan and we paid all that interest in advance well guess what he's gonna save himself around $43,740 in taxes alright or he's gonna get that back at the end of the financial year when he does his tax returns which is not bad right so yes he did pay it but you know what he's gonna get that tax return back so instead of paying you know 67,500 he's gonna instead pay 23,760 yes a bit of this will be offset in the following financial year but you know what he did this because he understands that in the 2026 financial year he's not gonna get this 150,000 dollar commission check because this was a once off massive sale for him that's why it was abnormal for him to receive this and that's why this strategy worked well for him with consulting with his accountant first before he even did all this right but everyone this only works when you know you're gonna make a lot of money in this financial year and not as much the next financial year alright because if you're gonna make the same amount of money in the next financial year well there's no point in doing an interest in advance loan because your tax bracket is still gonna be the same so the biggest downfall with doing an interest in advance loan is the rates okay so when we done the interest in advance loan in 2025 the rates was 6% now it's 2026 and guess what the rates dropped 25 points OK and guess what we're gonna probably see another 25 to 50 point drop by the end of the year alright or end of the financial year so therefore he's actually losing out a bit right there because he paid the interest at 6% but really if you average out on the following financial year after the one rate drop or even two rate drops it's gonna be around 5.5 or let's call it 5.75 okay so he's paying a little bit extra on the interest right there okay that's the only downfall I see in regards to doing an interest in advance line but like I said to you this is only viable if you're gonna make a heck load of money this financial year compared to the following financial year so remember everyone this is not tax advice I'm not a tax accountant you should always talk to your accountant before you wanna go down this strategy this only worked and this is what we did for our client on a consultant and on the agreement with his accountant as always thanks for joining me on another episode of the Morris Chat peace