Deductibility of Property Investment Loan Interest

Rental Property Advice, A Grade Tax Penrith

The Australian Taxation Office has flagged it will crack down on property investors claiming deductions for interest expenses on certain types of loan arrangements.

Property owners using some or all of the rental income from an investment property to pay off their own home loan while adding the interest from the investment loan to the principal of the investment loan and claiming it as a deduction would come under the scrutiny of the Australian Tax Office.


In a determination last month, the ATO said it would reject such arrangements.

The capitalisation of interest on an investment loan while the loan repayments are used to pay down the principal of a private loan is now under the spotlight.

The ATO's determination will apply retrospectively and could affect a landlord's past income and deductions, potentially costing them thousands of dollars.

A conservative approach should be adopted and property investors would be well advised to avoid claiming deductions for any compounding interest on their investment loan.

For further information contact A Grade Tax Accountants Penrith (02) 4731-1405.

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