If I want to change my main residence into an investment property, do I need to change my bank loan from a home loan to an investment property loan? If I leave it as a home loan, will I still be able to claim the interest incurred as a tax deduction?
How does the ATO determine which property is your main residence at any given time? Or is this decision made by yourself? and what proof is needed.
Interest on a loan to purchase a property earning rental income is deductible. What type of loan it is is not relevant.
Interest expenses | Australian Taxation Office
To show a property is your main residence the following guidelines are used.
Eligibility for main residence exemption | Australian Taxation Office
However you can continue to treat a property as your main residence after you move out. See rule below
Treating former home as main residence | Australian Taxation Office
If you use the above rule then you determine the days the property was your main residence once a CGT event occurs. (e.g. sale of the property). How you prepare your tax return will indicate this. You may need to keep evidence that you had moved out. (or moved back in)
Be wary of Land Tax which is administered by the States, not Federal Government. It can be a significant cost for any investor and it varies state to state. Queensland appears to be one of the more expensive with regards to Land Tax.
No, you do not need to change the loan type and I would strongly recommend against changing unless you want to pay more to the bank.
Investment loans are typically at a higher interest rate and the banks see these loans with a higher risk profile hence the higher interest rate.
If your situation changes and you need to refinance, you will be applying for an investment loan as they will ask during the application process. This is assuming you will answer them honestly.
There maybe T&C in your current loan contract which stipulates you need to advise the bank of your change in circumstances. I would be selectively ignorant of this, if these existed.
21 May 2026 · 4 min read time
15 Apr 2026 · 8 min read time
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