By Jason Given · 2026-08-16 · 7 min read
With an owner-occupied refinance, you are mostly focused on two things: the interest rate and the loan features. Lower rate, better offset, maybe a redraw facility. The structure is straightforward because there are no tax implications to worry about.
With an investment property, the loan structure directly affects your tax position - potentially for years. The interest you pay on an investment loan is tax deductible, but only if the loan is set up correctly. Get the structure right and you save on rate AND maximise your deductions. Get it wrong and the ATO may disallow deductions you were claiming.
This is not hypothetical. We regularly see investors who have refinanced through a bank or online lender and unknowingly contaminated their loan structure. The bank got them a slightly better rate, but nobody thought about the tax side. By the time their accountant spots the problem, it has been costing them for years.
This is where using a broker who understands investment lending pays for itself. The rate matters, but the structure matters more.
The ATO does not care which property secures the loan. They care what the borrowed funds were used for. This is the single most important concept in investment lending, and the one that trips people up most often.
A loan used to buy an investment property? The interest is deductible. That same loan topped up with $50,000 for a new car? The car portion is NOT deductible. You now have a mixed-purpose loan, and you need to apportion the interest between the deductible investment portion and the non-deductible personal portion.
If you mix purposes in one loan account, you need to track and apportion the interest for every single repayment. This is complex, error-prone, and the kind of thing that makes your accountant charge you more at tax time.
The solution is simple: always use separate loan accounts for different purposes. One account for the investment borrowing. A separate account for anything personal. Clean, clear, and easy to claim.
Whether you are refinancing to a new lender or restructuring with your current one, these are the principles that protect your tax position:
These are the errors we see most often - and every one of them is avoidable with the right structure upfront:
This is one of the most common scenarios we help investors with, so let's walk through it with real numbers:
You own your home, valued at $800,000 with a $300,000 mortgage. You want to buy a $600,000 investment property with a 20% deposit ($120,000). You do not have $120,000 in cash, but you have plenty of equity in your home.
The solution: refinance your home loan and release $120,000 as a separate split. Here is how the structure looks:
The critical detail is the separate split for the equity release. If you just increased your home loan from $300,000 to $420,000 without splitting it, you would have a mixed-purpose loan. The interest on the extra $120,000 would still be deductible in theory, but proving it and apportioning the interest correctly becomes unnecessarily complicated.
Lendology structures this as standard practice for every investor client. It takes no extra time, costs nothing extra, and protects your tax position from day one.
Yes. Interest on a loan used to purchase or improve an income-producing property is tax deductible. The key word is 'purpose' - the deductibility is tied to what the borrowed funds were used for, not the security. If you refinance and draw extra funds for personal use, only the investment portion remains deductible.
If you refinance for the same amount as your existing investment loan, the deductibility continues unchanged. If you draw additional funds, the tax treatment depends on what the extra funds are used for. Extra funds used for the investment property (renovations, repairs) remain deductible. Extra funds used for personal purposes (holiday, car) are not deductible.
A split loan separates your borrowing into two or more accounts - typically one for the investment purpose (deductible) and one for personal use (not deductible). This clean separation makes tracking deductible interest straightforward and protects your tax position. Without a split, mixed-purpose loans create complicated interest apportionment.
Yes. You can refinance your owner-occupied home to release equity for an investment property deposit. The key is to structure the equity release as a separate loan account. The interest on the equity release portion is tax deductible (because the funds are used for investment purposes), while the original home loan interest remains non-deductible.
Investing or refinancing?
Book a chat. We structure investment loans to maximise deductions and minimise rate.