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Your Debt Structure Matters!

Are you currently living in your own home?

Do you plan to move out of your home and turn it into a rental at any point?

If the answers to these questions are both ‘yes’, then it’s very important that you take a good look at your debt structure – your tax deductions later on could be heavily affected by your decisions now.

Where are the problem areas?

Issues can occur if you mix your home loan with lines of credit, car loans, and the like. This is a very common thing in Australia – the interest rate is often much better if you buy a new car or a new holiday using a redraw facility on your home loan. But the savings now could lead to bigger losses down the track.

If you move out of the house and rent it out, then you’d typically receive tax deductions against the rental income for the costs of the home loan. The Australian Tax Office (ATO) usually looks at the purpose of a debt, not what it’s secured against (i.e. your home), to decide whether costs associated with it count as tax deductions.  However, if your home loan is mixed in with other types of loans and credit, sorting out which charges are specific to the home and which aren’t can get difficult. In some cases, the ATO has allowed the home owner to pro-rata the costs – but in others, the ATO have been known to drop it into the ‘too hard’ basket and state that as they can’t see which part of the loan applies to the home and which to other debt, you can’t use the loan as a deduction at all. As you can imagine, this is not a desirable situation to be stuck in.

How can I avoid this issue?

The best way to avoid potential problems like this now and in the future is to create a separate line of credit loan that is secured against the home, but is not tied into the original home loan at all. We can help you to ensure that your debt remains uncomplicated.

What if I’m already in this situation?

If you already have other loans mixed into your home loan, then your situation is more difficult. The existing loans can’t really be untangled, but we can assist you in getting correctly set up for the future.


If you’ll want to claim tax deductions against the costs of your home, then it’s important that your home loan debt structure remains as uncomplicated as possible. If in doubt, talk to us to find out how best to achieve this.