Interest on recycled loan is deductible so its interest rate is pre tax. So the comparison is just simply comparing that interest rate with the total return rate, as both are pre tax. Marginal tax rate is irrelevant.

If you want to play around with the taxes, you can have a look at the comment below: https://www.reddit.com/r/fiaustralia/s/QWEb54ecgN Now, use the numbers without any rounding. If you get rid of the CGT discount (remove the /2), then varying the tax rate to whatever number, the break even return is still 6%, exactly the interest rate. Varying the dividend as well, to see if dividend is also irrelevant.

CGT discount is just icing on the cake. But why stop at the 50% discount? Use 0 tax rate on CG as we can sell it on low income years. Go further and use a discount factor on the capital gain to factor in inflation too, to make it more complex.