STRUCTURING YOUR LOANS for Tax Efficiency

Most property investors focus on finding the right property, negotiating the right price, and securing the best interest rate. All important. But there's a silent factor that can make or break your long-term returns — and it's one that many investors overlook until it's too late.

The Golden Rule: Keep Investment Debt Separate from Personal Debt

This is the single most important principle of tax-efficient loan structuring, and it's the one that gets broken most often.

In Australia, interest on borrowings used for income-producing purposes is tax deductible. Interest on your home loan is not. That distinction creates a clear imperative: never mix the two.

When investors tap into their home equity to fund an investment property deposit, a common mistake is drawing those funds into their existing home loan or into a redraw facility attached to their owner-occupied mortgage. The moment investment funds are commingled with personal funds, the tax deductibility of the interest becomes complicated — and in many cases, partially lost.

The correct approach is to set up a separate loan split or a standalone line of credit specifically for the investment purpose. The funds drawn from this facility go directly toward the investment property purchase. The interest on that facility is then clearly and entirely deductible.