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Damooo(Newbie)Newbie
13 May 2024

my question is around claiming the mortgage interest on an investment property.

We owned our PPOR outright and purchased another property as an investment which was rented out immediately for around 2 years, during this time we were able to claim the mortgage interest as a deduction.

We then moved into the investment property and rented out our previous PPOR meaning we couldn't claim the interest anymore.

My bank offered a "substitution of security" to retain the same loan agreement but replace the previous investment property (now PPOR) with the other rented out property as the security. In doing so would we then be able to claim the interest as a deduction again?

The mortgage was originally taken out as an investment so I was hoping this would help allow us to claim in this situation.

Thanks in advance

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2,332 views
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Taxduck(Taxicorn)Taxicorn
13 May 2024

As your original home has been paid for then any new loan will be for another purpose. In this case it was to purchase the second property. Nothing you do can change that fact. So the interest on the loan can only be claimed off income produced by the second property.

So, answer is no.

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Most helpful reply

Taxduck(Taxicorn)Taxicorn
13 May 2024

As your original home has been paid for then any new loan will be for another purpose. In this case it was to purchase the second property. Nothing you do can change that fact. So the interest on the loan can only be claimed off income produced by the second property.

So, answer is no.

Liked by Damooo
MrsMot(Newbie)Newbie
25 July 2024

Afternoon everyone


I know this post is a few months old, but I am seeking advice on a similar scenario. I’m looking to purchase a second property, but am not ready to move from my current one (which has a mortgage). Are there any tax / CGT implications if in a few years I decide to swap my PPOR to the investment property and use my current home as the investment?

AnitaATO(Community Support)Community Support
29 July 2024

Hi @MrsMot,


Yes, there will still be CGT implications. However, you may be able to use what's known as the 'Home first used to produce income rule' when it comes to selling the properties.


Your current main residence CGT will be calculated from the time you first rent it out. So, you'll need to know the market value of the property from this date.


This rule won't apply to the property that was rented out immediately after purchase. But you may be eligible for a 50% CGT discount when you sell this property after it's been your main residence.

CLion(I'm new)I'm new
30 Aug 2024

I have a similar situation. I moved into my investment property, which has a mortgage on it. I bought an investment property outright, which is rented out. I want to substitute the security on the mortgage of my PPRT (originally taken out to buy the first investment property) with the current unencumbered investment property. Thoughts?

Taxduck(Taxicorn)Taxicorn
30 Aug 2024

Whatever you do in regard to your loan doesn't change the fact that the property that is being rented was purchased without the need for a loan. No loan to purchase, no interest to claim.

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