Mortgage interest deduction

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(Newbie)Newbie

16 May 2024

Dear ATO,

I am writing to inquire about the deductibility of mortgage interest on my first property (A). My first property's mortgage was fully payoff and the loan account has been closed. I am planning to get a new mortgage from property A to buy a second property (B). Thinking about living in property B and rent out property A. Given there is income generated from property A, is ongoing interest from the new loan of property A deductible even it is fully payoff before?

Thank you

sfs4c03

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YEP

(Devotee)Devotee

16 May 2024

The interest on your new loan is not tax deductible because you are using your new loan to purchase a home for yourself, property (B).

Its the application of the new loan that counts and It makes no difference what you are using for collateral.

This question has been asked here before.

https://community.ato.gov.au/s/question/a0JRF000001Ps332AC/p00296108

If your having difficulty understanding all this then I would suggest you write to the ATO and ask for a private ruling so that you can speak to one of the ATO technical officers about all this and they will provide you with a written response so you get it right the first time.

https://www.ato.gov.au/about-ato/ato-advice-and-guidance/ato-advice-products-rulings/private-rulings/applying-for-a-private-ruling