Quick Guide: Claiming on Interest Deductions

At Duo, the success of our clients is at the forefront of our minds. We work with many investment property owners, and we receive a lot of questions surrounding interest deductions at tax time. In fact, the Australian Tax Office (ATO) has shared “almost one-third of people made mistakes when claiming their interest deductions”. 

It is important to us that we not only build trusting relationships with our clients but also provide you with resources to empower and educate you to make financial decisions. With that said, here is a breakdown of what you can and can’t claim on your interest deductions. 

The ATO advises the following: 

• “You can claim interest amounts if the rental property is rented, or genuinely available for rent at the time you incurred the interest.  
• You can also claim if the loan amount relates to the rental property and is for any of the following: to purchase the property, buy a depreciating asset, make repairs, or finance renovations on the rental property. You can also claim interest if you have pre-paid your loan for up to 12 months in advance.” 

Additionally, 

• “You can’t claim for the period you used the property for private purposes, even if it’s for a short period of time 
• You can’t claim on the portion of the loan you use for private purposes when you originally took out the loan, or if you refinanced 
• You can’t claim on a loan you used to buy a new home if you do not use the new home to produce income, even if you use your rental property as security for the loan 
• You can’t claim on the portion of the loan you redraw for private purposes, even if you are ahead in your repayments.” 

To see the ATO’s official document, visit this link. 

For further resources, Duncan Hughes from the Australian Financial Review has published an easy-to-follow guide on tax time for property owners and investors – have a look here for some further things to include or avoid.  

If you’ve still got some burning questions, or want to know more about your specific situation, reach out to the Duo team here!